
Everyone wants to provide a good life for their family. In the quest to secure and earn more for their loved ones, people invest and insure. These two things help you to make the most of your earnings. There are different insurance and investment plans available in the market. However, there is one plan that helps you to get both life insurance and investments in flexible funds to increase your wealth. This plan is the Unit Linked Insurance Plan (ULIP).
ULIP is a dual-benefit plan that helps you provide financial security to your family and grow your money to build a sizeable corpus in the long term. With time, better ULIP offers have been introduced by various financial institutions. In this guide, we shall discuss the benefits of investing in ULIPs and how they are the best use of your money.
What is ULIP?
ULIP is a financial tool to grow your investments and provides insurance coverage too. When you purchase a ULIP, you need to pay a premium. A portion of this premium is invested in equity or debt funds or sometimes allocated in a mix of both types of funds. Investing this way gives you the opportunity to benefit from potential high returns from equity funds and the low-risk advantage of debt funds. It helps you balance out the returns in the long term and build adequate wealth. You can align this investment with your long-term requirements, which may be for your children’s education, a wedding or owning a house.
Apart from making your money work for you, ULIP provides life insurance. This gives you peace of mind as it covers the uncertainties of life. This strategic plan can help you in multiple ways. Let's discuss the top benefits of ULIP to help you understand and utilise it better for your financial growth.
Top ULIP Advantages: Insurance Meets Investments
When it comes to building wealth or protecting the financial future of your loved ones, ULIP offers unique benefits. Due to the dual advantages of life insurance and investment opportunities with a single plan, it has become a preferable investment tool for people. Here are the key benefits offered by ULIPs:
Insurance and Investment
The biggest and most desired benefit of ULIP is that it serves two purposes at the same time. A fraction of the premium paid by you is utilised for providing life insurance which brings financial security for your future. The remaining part is allocated to equity, debt or a mix of both types of funds, as per your risk appetite and financial goals. So, it gives the dual benefit of protecting you while also building wealth in the long run.
Flexibility in Fund Choices
ULIPs offer you the flexibility to invest in funds of your choice. You can invest in equity funds or debt funds. Equity funds are high-risk funds but offer potentially high returns. However, debt funds are low-risk and have more stability. You can also invest in a strategic combination of both types of funds, going for a balanced approach. This freedom to choose as per your preferences helps you manage your investments better. Another unique offering is that you can switch funds during your policy, which allows you to make adjustments as per market conditions or changing goals. Leading insurers like Axis Max Life Insurance offer unlimited fund switches to help you manage your investment as per market fluctuations.
Long-Term Wealth Creation
Investing in ULIPs helps you build substantial wealth to achieve your long-term goals. You should stay invested for an extended period to benefit from the power of compounding. The interest earnings are reinvested, adding to the original amount and amplifying the returns over time. You can get an idea of the maturity amount with the use of the ULIP Calculator, which can be found on the websites of major insurers like Axis Max Life Insurance. It also instils the habit of disciplined savings for your long-term goals like planning a wedding, your child’s education or saving for your retirement.
Tax Benefit of ULIP
ULIPS helps grow wealth and saves it from taxes as well. The premiums you pay for ULIPs are eligible for deductions up to a certain limit under Section 80C of the Income Tax Act. The fund switches and the amount received at the maturity of your policy are tax-free, depending on conditions under Section 10 (10D).
Partial Withdrawals
You may require funds urgently in case of unforeseen circumstances. In traditional policies, there is no provision for taking out funds if you face such a scenario. However, ULIP has this distinctive benefit, that you can withdraw funds before maturity in case of an emergency, provided you have completed the lock-in period. This partial withdrawal option is available after a lock-in of five years. It helps you get access to funds without compromising your financial objectives.
Transparency
ULIPs put you in charge of allocating your money to the assets as per your preferences. It also provides transparency regarding the charges and returns related to your investment. You are informed about the updates, statements, and fund performance regularly so that you can manage your investment and make informed decisions.
Customisable Insurance
You can design your insurance plan by selecting riders to enhance benefits beyond the basic coverage. You can select from different riders like critical illness, accidental death or disability. Leading insurers like Axis Max Life Insurance provide a Policy Continuance benefit, in which future premiums are waived, but the benefit of ULIP remains the same, provided certain conditions are met.
Risk Diversification
ULIPs provide market-linked returns. However, it helps in diversifying the risk associated with market fluctuations by providing the opportunity to create a balanced portfolio. You can invest in a mix of equity and debt funds in a way that aligns with your financial goals. A balanced portfolio ensures stability and growth over time.
Conclusion
We can easily call ULIPs a comprehensive financial solution. It provides you with life insurance security and the ability to grow your wealth through market-linked investments. The unique features, like free fund switches, adding riders to enhance insurance coverage, and partial withdrawal options for emergencies, make it a well-rounded future growth option.
You can save for different financial goals, and ULIP provides you with the flexibility and tools to succeed. Consider a ULIP today to secure your future and make the most of its dual benefits.