Naa Songs
A unit-linked insurance plan is one of the Types of Life Insurance, &it includes two factors: insurance &investment. Unlike term insurance, ULIP offers a part of the premium to be paid towards life insurance &the rest towards investment. One can opt to invest in debt, equity, or both depending upon the level of risk &your objectives, making it an ideal investment option. It provides a flexible option to switch between the funds anytime during the policy tenure.
ULIP includes both investment &insurance factors, providing policyholders with dual benefits, i.e., securing their family’s financial future with financial growth. One should know how ULIP works, let us know:
- According to your financial goal, choose the type of policy, payment mode of premium, amount of premium, policy tenure, etc.
- In any unfortunate event during the policy tenure, the amount of the sum assured would be paid to the nominee.
- The remaining premium would be diverted for investment in the stock market with the help of debt, equity, or both.
- In the case of equity, funds are invested in stocks. In the case of debt, funds are invested in safe financial instruments such as bonds.
- Choose the payment mode, i.e. between lump sum &recurring payments to be made.
- Choose the payment cycle, i.e. annually, half-yearly, quarterly, or monthly basis.
Features of ULIP
Provided below are the salient features of ULIP:
- Dual Benefits
Unlike Term Insurance, ULIP has its dual benefits of insurance with investment, which allows wealth growth &financial security for family members.
- Fund Options
It offers many fund options, such as equity for high growth &debt for stability, which fulfils all types of risk tolerances.
- Life Cover
It provides life coverage to the policyholder’s nominees in case of the sudden demise of the policyholder, hence providing financial support to the family.
- Flexibility
It provides flexibility to adjust between the funds, allowing you to switch your investments as per the market conditions &your risk tolerance level.
- Transparency
The fees &charges are clearly disclosed, which helps in making informed decisions.
- Tax Benefits
Get a tax deduction on the amount of premium paid u/s 80C, &the amount of proceeds to be received on maturity is exempt from tax u/s 10(10D).
- Partial Withdrawal
Get your funds withdrawn partially from your fund value after the lock-in period is completed to meet emergency situations.
Who Should Invest in ULIPs?
Provided below are the different types of individuals who should invest in ULIPs:
- Long-Term Investors
As we know, investments made for longer periods reap maximum returns due to the power of compounding. Hence, investors who can wait for funds to be blocked for a longer time can invest in ULIP.
- Investment cum Insurance Seekers
If an individual is looking for insurance &investments &does not want to have separate policies, they can invest in ULIP.
- Goal-Oriented Investors
Individuals with an objective of return maximisation with the help of ULIP, i.e., through planned investments, can customise according to their own requirements.
- Those Willing to Bear Market Risk
As we know, ULIPs are market-based investment plans, i.e. subject to market risks. Hence, if an individual is willing to take risks, ULIPs are the most suitable plans.
- Tax Savvy Investors
If an individual is looking for tax benefits &investments, ULIPs are the one. It provides a tax deduction on the amount of premium paid u/s 80C, &the amount of proceeds to be received on maturity is exempt from tax u/s 10(10D).
Types of ULIP Plans
Provided are the types of ULIP Plans available in India:
- Equity Funds
These plans are basically long-term investments that come with high-risk tolerance. If an individual is looking for long-term investments with a good risk tolerance level, go for equity funds.
- Debt Funds
These plans are meant for conservative investors who want to get gradual returns with low risk. Such investments include debts, government securities, bonds, &other debt instruments.
- Cash Funds
Investments done in the money market that is owned by a bank are called cash funds, bearing a very low level of risk, hence the lowest returns.
- Balanced Funds
To balance risk &return, ULIP offers balanced funds where an individual can maintain a balance between debt &equity.
- Money Market Funds
Money market funds can help investors invest in short-term fixed-income financial instruments to preserve capital &liquidity. Investors seeking low-risk, short-term investments can use money market funds.
- Sector-Specific Funds
Under this plan, individuals can invest by focusing on certain specified sectors of the industry, like healthcare, technology, or energy.
- Retirement ULIPs
These plans help create retirement funds, helping a policyholder secure his retirement tenure along with earning returns. It combines investment &insurance, having a long lock-in period, where systematic withdrawals can be made.
- Child ULIPs
These plans are designed to fulfil the children’s financial needs, such as education or marriage. It offers parents life coverage &investment options that are well-aligned with their children’s goals.
Conclusion
ULIPs are the most preferable plans that help to secure long-term capital growth along with the financial future of family members. They are considered a source of fund creation &help to achieve tax benefits for the policyholder. The returns on unit-linked insurance plans are market-linked, which means they offer higher returns than traditional plans.
ULIP is a comprehensive financial tool providing dual investment &insurance coverage benefits. Due to its transparency, flexibility, &tax benefits, one can achieve their long-term goals &secure the family’s financial future.
