What are the benefits of ULIP?
What are the benefits of ULIP?
Make your money work for you is a quote that is often used by people. What does it mean? It means that utilising your income in such a manner that it grows overtime and helps you secure a financial future for you and your loved ones. You can make your money grow by investing it, as investments help in growing your wealth, depending on where and how much you invest.
One of the options that you can utilise to make your money work for you is a ULIP plan. ULIPs have been around for a while and have been preferred by first-time investors who look for a safe investment option. If you are wondering whether you should invest in one or not, read more to know the benefits of investing in ULIPs.
What is a ULIP?
ULIP is a plan which offers life insurance. In ULIP, you get the dual benefit investment and insurance under the same policy. The premium that you pay towards the plan is utilised for both investment and insurance. You get to invest in funds such as equity funds and debt funds. Equity funds are high-risk, high-return funds, whereas debt funds are low-risk, low-to-medium-return funds. The investment you make is based on your risk appetite and requirements.
Via the insurance aspect, your family is provided with a life insurance cover. They will receive a death benefit if you were to pass away suddenly during the plan’s term. They will also receive the maturity benefits once the plan matures.
Benefits of a ULIP
Listed below are a few ULIP benefits that you can enjoy when you invest in it:
- Tax benefits
As an investor, you will be looking for a product that provides great tax incentives in your investments. And that is exactly what ULIPs offer. Compared to other investment instruments, ULIPs offer many tax incentives. As per the new tax regime, premium payments of up to Rs2.5 Lakhs are eligible for tax deductions. In the old tax regime, this was limited only till Rs 1.5 Lakhs.
The tax benefits do not stop at just premiums. You get tax benefits on the payout you receive from the plan as well. Both death benefit and maturity benefit are eligible for tax deductions under Section 10(10D) of the Income Tax Act.
- Transparency
When you invest in a financial product, you would want to know how your money is utilised and how your investments are performing. Many products usually do not offer transparency, which makes investors sceptical about their nature. However, one of the ULIP benefits is transparency. When you invest in ULIPs, you get to see how your funds are performing. The insurer will provide you with statements that reflect the performance of your portfolio. You also get to see the NAV of your funds. This gives you an idea about the profit and loss ratio of your investment. Similarly, you get to see the charges being applied and how much of it is being deducted from your fund.
- Flexibility
As mentioned earlier, you get to invest in funds such as equity and debt funds in ULIP. Now, depending what your risk appetite is and what your goals are, you can choose to invest in either a single fund or both of them. If you wish to gain great returns quickly, you would be advised to invest in equity funds. However, as equity funds carry higher risk, the chances of your investment and returns getting impacted also increase. In ULIPs, you get the option of switching your investment. This allows you to reallocate your investment from one fund to another. You can also invest in both funds with the help of switching. If you wish to increase the amount of your investment, you can also do a top-up premium.
Conclusion
If you are looking to invest in product with such great benefits, you should opt for ULIP, meaning you should take the decision that lets you take advantage of investment and insurance in the same policy.
