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ULIP Is A Smart Investment Choice

Published On Oct 15, 2021 10:00 AM By InsuranceDekho

ULIPs, or unit-linked insurance plans, have recently gained popularity as one of the best investment possibilities. ULIPs have a distinct product stand that has been gaining popularity, from being exempt from Long-Term Capital Gains Tax (LTCG Tax) to acting as a conservative entry into the world of equity. ULIPs have been popular among investors due to recent market volatility and stable long-term performance.

A unit-linked insurance plan, or ULIP, is a market-linked insurance product that combines the best aspects of investing and insurance into one package. A ULIP is tied to market returns and allows you to invest in both stock and debt portfolios based on your risk tolerance.

Reasons Why ULIP Is A Smart Investment Choice

The following are the key reasons why ULIP is a smart investment choice:

1. Mortality Charge Return On Investment

ULIPs are programs that combine life insurance and investing possibilities in a single plan and charge a premium as a result. On the ULIP that covers life insurance, this premium includes a mortality charge. However, plans like Bajaj Allianz Life Goal Assure, which offers a return on mortality charge on maturity, are altering this. Once the plan matures, the investors will receive a refund of the mortality charge, as well as a free life insurance policy.

2. Optional Freedom

ULIPs give investors the option of switching between funds to maximize profits based on their needs. ULIPs often give the option of investing in pure debt, pure equity, or balanced funds. These products allow investors to switch between funds, allowing them to exit funds that are losing money. ULIPS offers a selection of 4 to 8 funds, depending on the risk tolerance of the client.

3. Ability To Save Taxes

The tax advantages of ULIPs have to be one of the most essential advantages. ULIPs offer tax advantages at both the time of purchase and at the time of maturity. Under section 80 C of the Internal Revenue Code, ULIP investments are tax-deductible (up to Rs 1.5 lakhs). Section 10 of the Internal Revenue Code exempts income derived through ULIP investments (10D).

4. Returns Booster

In addition to tax-free returns, ULIPs such as the Bajaj Allianz Life Goal Assure offer additional incentives such as a return enhancer if the investor chooses to accept maturity profits in installments. The Returns Enhancer, which is a 0.5 percent boost to each due installment, allows investors to obtain the maturity benefit in five-year installments while remaining invested in funds.

5. Increased Profits

Over the last decade, ULIPs and mutual funds have been known to compete for higher returns. MorningStar, an independent expert investment grading body that assigns 5-star ratings to funds with the lowest downward volatility, has given several ULIP funds 5-star ratings, reflecting their consistent performance. Longer investment tenure has been linked to higher returns.

6. Paying Term With A Low Premium

This is a crucial ULIP feature. You have the option of selecting a premium payment term that is shorter than the policy term. For example, for ULIP insurance with a 20-year term, you can choose a 5-year premium-paying period.


These are some of the reasons why ULIPs are the finest investment option in today's market. ULIPs are the answer to every investor's fear of market volatility, because of their low risk, high return characteristics, and simple switching alternatives. They provide mental comfort to investors who want to enter the world of equity to achieve their long-term financial goals without the worry that comes with market volatility.

Also read - ULIP V/S Endowment Plans

How to Invest in Equity through 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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