There is no dearth of investment options in the market. However, the trick is to choose the right investment option, which meets your goals and will help you grow your wealth. It might seem like a herculean task for the majority of investors to choose an investment product out of the available alternatives. Out of all the current investment options, a Unit Linked Insurance Plan (ULIP) is considered as a preferred and worthwhile investment. You need to understand the ULIP plan meaning and its benefits to take the right decision.
ULIP is an investment product, which offers dual benefits. It gives an insurance cover and helps in growing your investment in the long run. The amount you put into a ULIP will be divided into two parts. One part will go towards the insurance cover and the other part will go into the fund you choose. This means that you can earn market-linked returns while being covered for life. If you are looking for an investment product, which offers the benefits of insurance and flexibility in investment, a ULIP is the perfect choice for you.
Benefits of ULIPs
Listed below are six benefits that make ULIPs a profitable investment avenue.
- Choice from numerous investment options
A ULIP gives you a wide range of investment options, which means you can choose to invest your money into funds that fit your risk appetite and investment criteria. You can choose if you want to invest in debt funds or in the equity market or have a combination of both. In addition to the wide choice of investments, you can also switch between the funds without incurring any additional expenses.
2. Reliable
All ULIP schemes are transparent in nature. Before you invest in a fund, you can learn the charge structure and the expected rate of returns for the policy. You will know where your money will go. Additionally, you will be able to track the performance of your portfolio over a period of time. You can get updates about the latest applicable charges and the net investment amount as well.
3. High flexibility
One of the biggest ULIP benefits is the flexibility provided by the plans. You can choose between the different funds. Moreover, you can enjoy free switches from one fund to another. It will help maximize your returns and you can opt for top-ups on your plan.
4. Liquidity
There is a benefit of partial withdrawal in a ULIP. The minimum lock-in period of the fund is five years but you can make a withdrawal before five years by retaining only a small amount. You can also surrender the policy without any additional costs in case of a financial emergency.
5. Tax advantage
If you are still thinking,“why should I invest in ULIP”, you need to consider the tax benefit on investment. An investment in ULIP up to an amount of INR 1.5 lakh is exempted from taxation under Section 80C. In addition, the proceeds received at the time of maturity will also remain tax-free under Section 10D of the Income Tax Act.
6. Achieve long-term goals
With ULIP, you can choose to invest in funds of your choice based on the risk appetite. This means you can diversify your portfolio and achieve your long-term financial goals. It also brings financial discipline in your life and you will enjoy higher returns on investment over a period of time.
ULIP is an ideal investment option if you wish to increase your wealth in order to achieve your long-term financial objectives. It offers everything from high returns to flexibility, as well as stability, thereby making it a profitable investment for you.