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Thinking About Buying A Unit-Linked Insurance Plan? Here Are A Few Things To Keep In Mind!

Updated On Mar 07, 2022

A unit-linked insurance plan (ULIP) is a type of insurance that combines investment and insurance into one product. A Unit Linked Insurance Plan, or ULIP, is a form of insurance that combines wealth-building advantages with the security of your family's future. ULIPs allow you to invest in traditional wealth-building strategies while simultaneously offering life insurance coverage. As a result, purchasing a ULIP may be the most effective approach to guard against life's ups and downs. ULIPs allow you to invest in equities or debt funds, with investment returns decided by the funds' performance and risk tolerance. While the maturity benefit is susceptible to market risks, a ULIP's insurance coverage is not. A Unit Linked Insurance Plan (ULIP) is a type of Life Insurance policy that combines investing and insurance benefits. ULIPs are a sort of life insurance that allows you to save money while still getting protection. ULIPs are investment products that put your money to work for you (equity, debt, or a combination of both). Your investment results are determined by the performance of the funds you select.

What You Should Know About Unit-Linked Insurance Plans

When you purchase a ULIP, you are purchasing both insurance and an investment opportunity. This will give your family not just protection throughout the insurance's life, but also big returns on investment when the policy matures. To help you accomplish your long-term financial goals, you can pick from several funds that are a mix of equity and debt. When it comes to ULIPs, there are a few things to bear in mind:

1. Addition of Value

ULIPs offer both life insurance and the opportunity to develop wealth. By investing in ULIPs, you can get market-linked returns. Because of this dual benefit, ULIPs are used as a comprehensive financial product.

2. You can also choose your Investment Strategy

  • Depending on your risk tolerance, you may invest your money in a variety of ways.
  • For risk-averse investors, equity funds are an excellent option.
  • Moderate risk-takers may benefit from a balanced approach.
  • Debt funds are a great alternative for anyone looking for a low-risk investment.
  • Depending on market conditions, investors might make modifications to their portfolios.

3. The Advantages of Taxation

Under section 80C, premiums paid towards a ULIP are eligible for a tax deduction of up to Rs 1,50,000. If certain circumstances are satisfied under Section 10(10D) of the Internal Revenue Code, the policy's returns are also eligible for an income tax maturity benefit. ULIPs with annual premiums above Rs. 2.5 lakh issued on or after February 1, 2021, would not be excluded under Section 10 of the Act.

4. Switching

Switching is the process of moving money from one mutual fund to another. If your investing strategy changes throughout the plan's term, you can use the switching option to change your investment funds for free up to a certain amount in one policy year.

5. Withdrawals in Part

The option to make partial withdrawals is a characteristic of ULIPs that is not available in other insurance policies. This withdrawal can be done at any moment after the first five years of the plan, and a limited number of withdrawals are also free.

Take Away

India has advanced from trading bonds under a tree to offer a varied choice of financial instruments that allow people to invest their money according to their requirements, limits, risk appetite, and financial aspirations. ULIPs, on the other hand, are investments that may be used for both insurance and profit.

Also Read: How May ULIPs Help You Build Long-Term Wealth

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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