Unit linked insurance policy, or ULIP is unique insurance plans that offer you the dual benefit of both – life cover and investment. The payable premiums are divided into two parts – one of the parts is used as pay premiums for your life cover. The second part for your investment is invested in the money market. ULIP plans are essentially lucrative for those who wish to invest on a long term basis. This investment can then be used for your child’s higher education, creating capital for future business, or even for buying your dream home. ULIPs could also prove exceptionally helpful if you are planning for early retirement.
However, these are not the only reasons why many invest in ULIP. The ULIP plans offer financial protection and facilitate an increase in wealth.
In this article, we will discuss some of ULIP’s features which make it famous as wealth creation plans.
Predominantly to switch funds during the policy term. The switching of funds, however, depends on your investment goals and risk appetite. Some of the funds which you can choose to invest in are:
- Growth funds
- Equity funds
- Balanced funds
- Large-cap equity funds
- Income funds, and many more.
If you wish to switch these funds for another one, all you have to do is pick the policy, change the allocation of the funds, and then continue with them till the term-end. This offers you a great opportunity to come out of an underperforming fund.
When it comes to taxes, under Section 80 C of the Income Tax Act 1961, these plans offer an advantage of tax rebate up to Rs. 1.5 lakhs. The tax can be claimed against the payable premiums. As an investor, you can reap attractive returns with the unit-linked insurance policy. Furthermore, the maturity sum that you receive from ULIP is also exempted from tax under section 10 (10D). As a result, the ULIP plans may help you save more with the possibility of building you a significant financial corpus.
Good for first-time investment:
If you are a first-time investor, ULIP is one of the most preferred investment. It offers you a variety of minimal to high-risk plans. You can choose any of them which are in lieu of your investment goals and the amount of investment which you are willing to make. Additionally, these funds are managed by experts. These expert fund managers ensure that you reap maximum benefits and safeguards your investment against the constantly changing market trends.
With all these benefits, it is safe to say that this wealth creation plan certain to play a notable role when it comes to building a strong financial corpus. However, as a safe practise, it is crucial that you, along with your financial advisor, check the past performance of the fund.