A ULIP plan is a great way to aim for financial security for your family while reaping the potential benefits of market-linked investment returns simultaneously. Sounds interesting, right? These are plans that offer the dual benefits of investment and insurance, helping you integrate a dynamic addition to your portfolio. Let’s learn more about them below.
Key Aspects of ULIPs
Now, talking about a ULIP plan, it suffices to say that it is a combination of life insurance and investment. In this case, you’ll come across policies that offer a certain level of life cover. In case of your unfortunate demise within the policy tenure, the insurer will pay the sum assured to your nominees. They will thus get financial protection in such an event. At the same time, you also get the opportunity to invest in equity, debt, or hybrid funds as per your financial goals and risk appetite.
You can combine these fund options in your portfolio and stay invested for the long term to potentially reap higher returns. These policies come with a mandatory lock-in period of five years as per regulatory guidelines. The longer you hold onto your investments and ride out temporary market fluctuations and dips in value, the greater your chances of benefiting from market growth.
ULIPs are also considered tax-efficient. You can get deductions under Section 80C for the premiums you pay, subject to applicable limits. Additionally, tax exemption on maturity under Section 10(10D) is available only for ULIPs where the annual premium does not exceed ₹2.5 lakh (for policies issued on or after 1 February 2021).
At the same time, there is flexibility in terms of switching your funds periodically to replace underperforming ones with better options. Most plans offer a limited number of free switches per year, after which charges may apply. You can also use this feature to periodically rebalance your portfolio and manage your risk exposure, as per market conditions.
Most ULIPs are professionally managed. So, you can use them to meet long-term objectives like funding your child’s higher education, retirement planning, buying a home, and more.
Who Are ULIPs Ideal For?
A ULIP plan may suit investors looking for a combination of market-linked investment with basic life cover. If you have moderate to high risk tolerance in terms of fund investments and can stay invested for the long haul to build a sizeable corpus, then this might work for you. It is also ideal for people looking to meet mid-to-long-term goals. But the individuals need to become comfortable with the lock-in period.
To put it in a nutshell, ULIPs can be a good choice if you want to build wealth for the future, meet your goals, and have some insurance protection. However, it is important to note that the life cover in ULIPs is generally lower than what standalone term insurance plans offer. Hence, you can opt for them alongside existing term plans or employer-provided insurance.
They are also considered tax-efficient under certain conditions, which is another plus point worth considering.
Hence, without delaying any further, check out the available ULIP policies. When doing so, compare them based on their features, premiums, coverage, and tenure. Finalise the best plan for your needs and start your journey towards a better financial future.
