If you want to secure your future and those of your loved ones, then financial stability is important. To achieve that kind of security in the years to come, one must invest smartly in the present years. The investment amount earns returns for a long period of time, post which you can enjoy the results of your investment. Along with the right investment at the right time, a life insurance policy is also a vital addition to your financial portfolio. Buying a ULIP plan is an effective way of hitting both targets – insurance and investment – with one stone. What is a ULIP policy? It is a product that offers life insurance and investment returns under a single product.
Whether you are a bachelor or a married individual, you would have some plans for your future. A ULIP plan can help you achieve those plans and secure your dreams.
How do ULIPs merge investment and insurance into one product?
In a regular life insurance policy, the premiums are used solely to build the life cover. In a ULIP policy, however, the premiums are used to contribute to the life cover as well as to invest in equity funds or debt funds. You can also choose balanced funds which offer a mixture of both types of funds if you have a moderate risk profile.
The investment portion of your premium is collected along with money from other policyholders and invested in the chosen financial instruments. You are allotted a number of units depending on your share of the collective investment amount. Your returns from the fund are calculated depending on the number of units you hold.
Features of ULIPs to help you secure your feature
Life insurance and additional coverage
If you have dependents, a life insurance policy is not a choice, it is a necessity. The future is unpredictable. One of the best things you can do to ensure that your loved ones stay safe in the face of an unfortunate event is to buy a life insurance policy. A ULIP plan provides this coverage along with a host of other benefits. And what’s more, you can also buy add-ons such as critical illness rider which provides a lump-sum amount when you are diagnosed with a covered illness.
Other riders such as accidental permanent disability disorder, accidental death disorder, waiver of premium rider, and so on can also be beneficial.
A variety of funds to choose from
Are you ready to take risks and are looking for high returns from your ULIP plans? Then equity funds are the right option for you. But if you want to take a low-risk approach, then you can go for debt funds. As mentioned before, hybrid funds are also available. This option of getting to choose between different types of funds makes ULIPs a good choice for people with different risk profiles. Since you have a strong idea of the kind of returns you will receive in the long run, there is a steady source of security.
Fund switching options
You may have previously wanted to invest in debt instruments once due to the safety they offer. But now, equity funds seem more appealing, and you have developed a good risk appetite. So, does that mean that you should sell your debt ULIP and buy a new equity scheme altogether? Not at all, if you are a ULIP policyholder. You will have the option of transferring your funds from debt to equity and vice versa.
Substantial tax benefits
Saving tax is important for a financially secure future, and ULIPs are a great way to do that. The amount that you invest in a ULIP plan within a year can be used to claim tax deductions up to Rs 1.5 lakhs, as per prevalent tax laws. There are tax exemptions as well. When you partially withdraw from a ULIP plan, surrender it, or stay till maturity, the amounts received on each occasion are tax exempted. If you have bought a critical illness rider, then the premium paid for the same can also be used for tax deductions.
We hope this article has increased your knowledge of what a ULIP policy is and its various nuances. To curate a ULIP policy that offers comprehensive security for your future, ensure to consult a financial expert.
Tax benefits are subject to amendments in tax laws and are subject to terms and conditions.
