What Are The Benefits of Assets Allocation in ULIPs?
Updated On May 02, 2021
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ULIPs are emerging to be a popular source of investing the funds among various asset allocation options such as equity, debt instruments and money market instruments. The policyholder pays a fixed amount i.e premium, from which a portion of it is allocated to several fund options and the benefits are reaped from the investment. An individual need not to purchase a life insurance policy separately while choosing an ULIP as it is included in the plan itself.
Benefits of Assets Allocation in ULIPs
There are numerous benefits of asset allocation in ULIPs, some of them are as follows.
1. Fund Options
Most of the ULIPs provide an array of fund options under their plan to provide the policyholder with the substantial flexibility in investment horizons. The details such as name of the fund, description of the fund, % of premium allocated in each fund, and risk and returns involved are explained in the plan brochure.
2. Partial Withdrawals
Almost every individual gets in the need of emergency funds, these kinds of requirements are fulfilled by ULIPs via its partial withdrawal feature. These withdrawals can be made as per the terms and conditions of the plan.
3. Long Term Investment
ULIPs have a lock-in period of 5 years where no withdrawals can be made and the premium allocated is locked in the fund options chosen by you at the inception of the policy. A ULIP gives considerate time to an investment in order to grow and maximise the wealth of the policyholder. ULIPs can be considered to achieve long term goals such as buying a house, marriage, higher education of your children, retirement, etc.
4. Fund Switching
ULIPs usually come with the option of fund switching where you have the liberty to replace your current fund option with another one. The policyholder can switch the fund options as per their risk assessment and prevailing market conditions.
5. Sum Assured
If you choose asset allocation in ULIPs, the plan provides a fixed amount known as ‘sum assured’ which is provided by the insurance company to the nominee in case of an unfortunate demise of the life assured.
6. Tax Benefits
The investments made in ULIPs are eligible for deduction under the section 80(C), while the returns on the policy are exempt from taxation on maturity under section 10(D) of Income Tax Act.
7. Additional Benefits
ULIPs provides some additional perks to its policyholders such as top-up options, premium redirection option, premium reduction, and riders etc. These benefits enhance your plan while providing customised features.
Conclusion
Asset Allocation in ULIPs is beneficial in abundant ways, be it multiple fund options or long term life cover to the life assured. ULIPs aims at providing a single solution to 2 different issues i.e investment and life cover. Future goals can also be assisted via staying invested in ULIPs for a longer period of time. Consider an ULIP today if you have a zest for investment, have a risk appetite, and require a life cover.
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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.
