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Top Reasons to Hold on to Your ULIPs

Updated On Mar 23, 2022

Unit-linked Insurance policies are investment instruments that offer a high rate of return while also providing coverage for the policy's lifetime. As a consequence, you may attain both wealth growth and life insurance with only one insurance policy. Because ULIPs have a five-year lock-in period, they are best used as long-term investment choices. Furthermore, because ULIPs are EEE investments, you may deduct the deposit, accrual, and withdrawal from your taxes using Section 80C. A portion of the ULIP premium is used to invest in equity/debt-based instruments, while the rest is utilized to provide insurance coverage.

Top Reasons to Hold on to Your ULIPs

Top Reasons to Keep ULIPs in Your Portfolio

The following are the main reasons to keep your ULIPs:

1. Investment in Wealth Creation

ULIPs are ideal for building long-term wealth in order to attain life objectives such as buying a car or a home. After the five-year lock-in period, you're likely to obtain a higher return than you put in since these instruments take advantage of compounding. It's advisable to invest in ULIPs for longer than the five-year lock-in term if you want to make significant returns.

2. Flexibility

ULIPs are mutual funds that invest in a variety of assets, including equities, debt, and balanced funds. It enables the investor to change the amount invested between them depending on their investment goals and risk tolerance. For example, if the investor's aim is to develop wealth, equities funds are a good choice. Debt funds, on the other hand, are a suitable option for investors looking for a steady stream of income over time. Several times a year, reputable insurance companies enable investors to change their plans for free.

3. Benefits from Taxes

Investors can deduct their ULIP investments under Section 80C. You might save up to Rs. 1.5 lakh on premiums as a consequence. The death and maturity benefits are tax-free under Section 10(10D) of the Internal Revenue Code. ULIPs, in general, are suitable for people looking for pension and retirement benefits. When you purchase a ULIP pension plan, you are entitled to complete life insurance. ULIPs are an excellent choice for investors who wish to grow their money while also safeguarding their family's future. Investing over a longer period of time can help an individual achieve their long-term goals. Some of the best ULIPs available today include advantages like partial withdrawals, free fund switching, and tax-free maturity payouts, in addition to mandatory investment returns.

4. Withdrawal in Parts

The nicest thing about ULIPs is that after the first lock-in period has expired, they enable partial withdrawal. Partially withdrawing cash is usually subject to a set of conditions established by the insurer. As a consequence, you can take a set amount from the corpus at any time, depending on your financial circumstances.

5. Investment

Another big advantage of ULIPs is that they allow you to make profits by investing in both stock and debt assets. ULIPs may be a superior option for long-term objectives. You can pick from debt, equity, or a combination of the three depending on your needs, risk appetite, and investment horizon. With ULIPs, policyholders have a range of fund alternatives, including stocks, bonds, and hybrid funds.

Take Away

When it comes to financial objectives, we usually want to put our money where it will be most effective. Investors choose Unit Linked Insurance Plans (ULIPs) in this regard because of the multiple benefits they provide. On the one hand, a term plan offers life insurance. If the policyholder dies within the policy period, the beneficiary will get a lump-sum payout. However, there is no financial support for this technique. ULIPs, on the other hand, allow you to both invest and insure your assets. A ULIP is a type of insurance policy that has two advantages. Insurance businesses, in this scenario, provide investors the opportunity to invest in addition to providing insurance.

Also read- Know About Partial Withdrawals From ULIPs

Where Does My Income Go When I Invest in ULIPs?

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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