ULIPs: Top 5 Reasons To Buy
Published On Oct 31, 2021
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One of the reasons your huge ambitions are so enormous is that they require a significant amount of money, whether it's for a dream home, a start-up, or your children's higher education. To accumulate funds, you must invest consistently over time. If all of this sounds too complicated for you, we recommend that you relax and opt for a simple solution: purchase a goal-based unit-linked insurance plan, or ULIP, which not only provides life insurance for you and your family but also assists in the accumulation of a substantial corpus to achieve your life goals.
ULIPs: Top 5 Reasons To Buy
Here are the top five reasons why you should get a ULIP right now:
1. ULIPs Provide You With The Investment Flexibility
One of the most appealing features of a ULIP is the investing freedom it provides. Investors can choose from four basic funds in any ULIP. Equity funds (highest risk factor), income/fixed interest/bonds (medium risk), balanced funds (medium risk), and cash funds are among them (low risk). Customers can switch their savings from one fund to another and retrieve any portion of their assets in the event of an emergency using ULIPs. Most new ULIPs have no fees for transferring funds and provide partial withdrawal access to about 95 percent of all funds.
2. ULIPs Allow You To Profit From Market Volatility
Investors in ULIPs have the option of selecting the ideal mix of funds from equities, debt, and mixed assets to meet their risk appetite, financial goals, and income, among other considerations. Another underappreciated benefit of ULIPs is the ability to quickly swap between different funds to take advantage of market volatility. We all know that the investing market is unstable and volatile owing to trade wars, elections, and social and political developments and that putting your assets in an investment instrument that allows you to profit from this volatility is the best way to protect your money.
When the market is bullish, for example, investors should consider switching to equity funds to assist optimise gains. Similarly, if the market is experiencing a gloomy time, they can eventually move funds to debt in order to optimize their gains. This flexibility allows you to profit from market volatility and invest strategically so that you can meet your financial goals regardless of market swings. This benefit is not available in most financial products.
3. ULIPs Assist In The Development Of Long-Term Saving Habits
Another compelling incentive to put your money into a ULIP is that, unlike other financial products that may encourage short-term saving or investment behaviors, ULIPs are designed to help you build long-term wealth. This is because most ULIPs have a five-year lock-in period, which encourages investors to focus on long-term goals. Another advantage of long-term investing is that, because your money is invested for the long term, you are more likely to survive market shocks, allowing you to earn higher long-term returns than short-term horizon investment products, which are severely impacted by market shifts.
4. Tax Advantages Are Available With ULIPs
ULIPs also comes with a number of tax advantages, making them a popular investment vehicle. ULIPs have a sum assured that is greater than 10 times the annualized premium, allowing them to be tax-free under Section 10(10D) of the Income Tax Act. This simply means that they are not subject to the long-term capital gains (LTCG) tax. While other investment alternatives are subject to the LTCG tax (as of April 1st, 2018), ULIPs exclude investors from the tax and allow them to choose between equities, debt, and cash-oriented funds with ease.
5. ULIPs Provide You With Insurance Coverage
Finally, a ULIP is, at its most basic level, an insurance policy. They assist safeguard the financial future of your family and loved ones, guaranteeing that in the terrible event that you are no longer able to care for them, their future is secure.
ULIPs are a good long-term investment alternative. When investing in ULIPs, it's a good idea to look at the performance of individual funds and choose funds with high ratings.
Also read - Why ULIP Investments Are Advantageous ?
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.