People manage their finances in such a way that it allows them to build their wealth over time and achieve their personal financial goals. With multiple investment options available in the market, choosing the right one can be a daunting task. Amongst all the options, we believe you must be aware of the Unit Linked Insurance Plans (ULIPs).
ULIP is primarily an insurance instrument that also offers the benefit of investments. So, a part of the premium paid towards ULIP is used for life insurance coverage, while the remaining amount is invested in funds of your choice. The amount is invested in equity-oriented funds, debt funds, or a combination of two. This entirely depends on your risk appetite at the given time.
So, whether your financial goal is to save for your retirement or fund your child’s education, ULIP investments help you to accomplish these goals. In this article, we will be discussing how ULIP can help you with flexible investing.
1.ULIP offers dual benefits
The primary benefit of investing in ULIP is that it allows you to enjoy life insurance coverage as well as lets you invest in funds of your choice. Compared to other savings options available in the market, ULIP is the only option that offers insurance coverage. This way, your loved ones are financially secure in case of your unfortunate dismissal.
2. ULIP allows you to choose the life cover you need
Since ULIP offers life insurance coverage benefits, you also have the liberty to determine the exact coverage you need. Generally, people opt for coverage that is ten times more than the annual premiums they pay. In case you want additional coverage, know that you can increase the cover-up to 40 times the annual premiums paid or higher.
3. ULIP tax benefits
The premiums paid towards ULIPs are tax-deductible under Section 80C of the Income Tax Act. The current limit is set for up to INR 1.5 lakh wherein your premium amount should not be more than 10 percent of the sum assured.
4. ULIP liquidity
ULIP has a lock-in period of five years. After the lock-in period is over, you can access your funds in case of any financial crisis. With the facility of partial withdrawal under some clauses, you can withdraw a certain amount from the policy without having to pay charges on it.
5. ULIP fund switching
One of the unique ULIP benefits is that it allows you (the investors) to switch between the funds. This means you can switch from debt to equity and vice versa, depending on market performance. So, in case you are not satisfied with the fund performance, you can make the switch and choose funds that gain you reasonable returns.
6. ULIP offers tax-free withdrawals
In case of your unfortunate dismissal or the policy matures, the amount that is paid out is entirely tax-free. This benefit is exclusively provided under ULIPs only.
7. ULIP top-up premiums
If your ULIP is performing quite well and you have surplus cash on you, then you can choose to make an additional payment on your existing premiums. Making top-up payments on your current policy is always a better option than seeking another investment plan. Moreover, you can stop these top-ups as per your will and do not have to incur any penalties.
Hope these points helped you to understand how flexible ULIPs are. So why wait? Consider adding a ULIP plan to your investment portfolio today!