Insurance is a must-have for all. It is a crucial investment tool that guarantees protection against uncertainties. Other insurance products offer the dual benefit of security and returns on investment, and ULIP is one such product. Read on to know more about the benefits of investing in ULIP.
Financial planning is vital for everyone, be it for assuring financial aid to your family or securing their future financial needs. With different investment products available in the market, it can be overwhelming to choose the right one, especially if you are an amateur investor. But, if you have a clear objective in mind and know what you want to achieve with your investment, choosing the right product becomes a lot easier.
So, if your goal is to choose an investment that offers the benefit of protection as well as the opportunity to invest in the money market, Unit Linked Insurance Plan is your best choice. Investing in ULIPs have other benefits. Firstly, it gives you the flexibility to choose the best investment fund based on your needs and secondly it has the potential to provide you inflation-adjusted returns. Let us look at some of the benefits of investing in ULIPs:
Dual benefit of insurance and investment
ULIP is the only investment product in the market that offers both insurance cover as well as returns on investment. A portion of the premium you pay is used for protection, and the remaining amount is invested in the funds of your choice. Thus, you not only get protection but also you earn valuable returns in the long run.
Wide choice of investment options
Unlike other investment products where you don’t have the choice to choose your own funds to invest, ULIPs allow you to choose different funds based on your risk-appetite and financial goals. For instance,
- Low risk-takers can invest in debt funds
- If you are a moderate risk-taker, you can invest in balanced funds
- If you are an aggressive investor, you can invest in equities
Flexibility to switch portfolio
One of the significant benefits of investing in ULIP is that it gives you the flexibility to switch the funds at any time during the policy term. You can switch your investment in debt funds to equities or vice-versa depending on your changing financial goals and the market condition. You can change the ratio of the amount invested in different funds and get maximum returns.
This is another significant benefit of invest in ULIP. You can voluntarily pay an additional premium, over and above your actual premium amount. You can use this feature to your advantage when the fund is performing and increase your returns. Also, getting a top-up premium is much convenient than buying a new ULIP plan. Since it is a voluntary payment, you don’t have to commit to paying a compulsory premium every month.
Riders are special add-on protection plans that you can purchase over and above the coverage included in the main policy. You can choose from a wide range of rider options to suit your needs and get more comprehensive protection.
One of the biggest concerns of many investors is tax-savings. Being an insurance product, ULIPs allow you to claim for a tax deduction on the premium paid. You can get a maximum deduction of 1.5 lakhs INR on the premium paid under Section 80C. The payout you receive on the maturity is also exempted from tax under Section 10D. Thus, ULIPs are a tax-efficient investment product.