Reasons to buy a ULIP today!
The world economy is always at risk of fluctuating due to various external factors. These fluctuations have a severe impact on the basic cost of living for everyone. It can be hard for individual earners to navigate through the rising cost while wanting to save enough for future goals or for their loved ones. Growing your wealth can be beneficial in such a situation; however, market-linked investments are always risky and could cause losses. On the other hand, a financial instrument such as a ULIP has multiple benefits in a single policy. Read on to know these benefits and why you should invest in a ULIP plan immediately.
Dual benefits in a single policy
Unit linked insurance plan or ULIP is a type of life insurance policy. Under this policy, you get to enjoy dual benefits: investment and insurance. But how does this work? One portion of the premium that you pay for your ULIP plan is used in providing life insurance cover. This cover helps your family cope with different life risks, especially in your absence. One portion of the premium is used to investment in market-linked funds offered in the plan. You have the option of investing in equity fund, debt fund, or both of them, to increase your wealth for a better future.
It has tax exemptions
Like every insurance policy, ULIP has different tax exemptions. The premiums that you pay for your ULIP is exempted under Section 80C of the Income Tax Act. This exemption can be availed on a premium payment of up to Rs.1.5 Lakhs per annum. The maturity benefit that you receive at the end of your policy is also tax exempted under Section 10(10D) of the Income Tax Act. If you make partial withdrawals from your ULIP, those withdrawals are also tax exempt under conditions in Section 10(10D) of the Income Tax Act. These tax exemptions help you in saving a substantial amount.
Switching of investment is allowed
The investments made in a ULIP are based on your risk appetite. If your risk appetite is high, you can opt for equity debts, as they are offer higher returns.However, they also carry a huge risk factor. Similarly, if you want to play it easy without risking anything, you can go for debt funds which carry a low risk factor and offer low-to-medium returns. However, the risk appetite does not always stay the same. Your life goals or needs may also change overtime.
In such a situation, you always have the option of switching your investment in a ULIP. This is one of the ULIP benefits in which you can reallocate your investments as per your risk appetite and needs. For example, if your maximum investments are in equity funds but, you are concerned about it getting exposed to risk, you can switch your investments to debt funds. Do keep in mind that you are only offered a certain number of free switches before charges are applied on it.
Premium can be topped-up
A pre-determined portion of the premium that you pay for a ULIP is used for investments in funds. Now, while your investment will increase based on where it is invested and how the market is performing, you have the option of increasing the investment amount. This can be done with the help of a top-up premium. A top-up premium basically allows you to add an extra amount to the premium you have already paid for the policy. This added amount can be then redirected towards the funds in which you have invested. For example, if your yearly premium is Rs.50,000 and you want to increase it by Rs.20,000 for one year in order to increase your investment amount; you can simply go for a top-up premium of that much amount. Once the amount has been added, you can then reallocate to the fund of your liking.
These are just a handful of ULIP benefits that you, as a potential investor, can enjoy. If you want to know more about investing in ULIP and the types of ULIP you can invest into, you can get in touch with your insurance advisor or visit the website of your preferred insurer.
