ULIPs or Unit Linked Insurance Plans are innovative financial instruments that have become quite popular among investors. You may be aware of the reason behind it – the convenience of dual benefits under one plan. With a ULIP, you get the security of insurance and returns from your investment.
Many people do not feel comfortable investing in a ULIP plan in India as they are unsure about the right amount to start with. Since there is a risk involved with any market-linked product, not every investor feels comfortable with it. In general, you can start investing in a ULIP with as little as Rs. 1500, per month.
In a ULIP, you invest a portion of your premium in different funds. The amount of money may vary depending on the types of funds available with a particular ULIP. For investors who are hesitant to invest in ULIPs, it may be helpful to know the benefits offered under it.
Here’s why investing in a ULIP might be suitable for you:
1. Flexibility
One of the main reasons for people’s uncertainty towards investments is the long-term commitment that comes with it. It is unfavorable for most people to put their money out of their reach for an extended period without much control. With a ULIP, it is not the case.
As the policyholder, you have control over the choice of funds for investment. Within the plan duration, you can switch between funds easily if you feel that your goals are more aligned with another fund’s performance or similar other reasons.
In general, insurers offer a certain number of free switches with ULIPs annually. Not every insurer has the same risk-appetite for investments. You can choose between different fund options, depending on the level of risk you can bear.
2. Tax Benefits
Since ULIP is an insurance product, you can get certain tax benefits with it. Every earning individual looks for ways to reduce their taxable income to the best extent possible. ULIP is one of the financial tools that can help save tax effectively.
IRDAI has specific guidelines for ULIP investments to protect the interests of policyholders. Under Section 80C, the premiums paid on ULIPs are eligible for deduction up to a maximum limit of Rs 1.5 lakhs during a year. Also, the amount you receive on maturity is tax-exempt under Section 10(10D).
3. Investment Planning
When you invest in a ULIP, you can accumulate a sizeable fund over time. You have the option to invest in different types of funds, depending on your financial profile. It can be useful in meeting long-term goals as it helps in growing your money.
Like most people, you may have long-term goals like buying a house, a car, etc., for your future. ULIP can be a suitable investment choice for such goals since you can get good returns. It is favorable to stick with a ULIP for a long-time to reap more significant benefits.
4. Life Cover
As mentioned earlier, ULIP provides policyholders the benefit of insurance and investment. Its life insurance component creates a financial safety net for your family. It will benefit your loved ones financially as defined in the plan in case of an unfortunate event.
Investing in ULIP also gives you the peace of mind that your family’s needs will be met even in your absence. They will not have to compromise their goals or lifestyle due to a lack of sufficient funds.
5. Riders
Like most insurance plans do, ULIP also offers the option of attaching riders to it. Adding a rider can give your family comprehensive protection against unpredictable circumstances. You can evaluate the specific requirements and choose from the most suitable ULIP plan in India with or without riders.
Different riders are available with different types of insurance. It is best to ask your insurance provider about the availability of riders at the time of policy purchase.
Opt for a Comprehensive Financial Solution
Planning your investments is crucial to get the best results. It would help if you consider your personal financial goals to determine the right amount to invest. It depends on your life stage at the time of investment, along with several other crucial factors. Once you know what is ULIP and are sure of the objectives that need to be fulfilled, you can find an appropriate ULIP.
Make sure to compare different ULIPs available in the market to make an informed decision. It will give you a clearer idea of the adequate investment amount for ULIP. Furthermore, it is essential to go with a trusted insurance provider who can offer the desired benefits.
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