Savings have always played a crucial role in our lives. When we receive our first cheque, we put aside a certain proportion of our hard-earned to accomplish our financial goals in the future. Rather than letting your savings sit in the bank lockers, you should invest it in a Unit Linked Insurance Plan (ULIP) for the growth of your funds. A ULIP Plan is a unique financial product, which is a combination of investment and insurance.
Before purchasing a ULIP Plan, let’s begin by understanding what a ULIP Policy is:
A ULIP Policy is a dual investment product. It works in your favour by offering dual tax benefits on premium and the maturity proceeds. As a policyholder, you can claim a tax deduction up to Rs. 1,50,000 on taxable income according to Section 80C of the Income-tax Act, 1961. In addition to this, the pay out that your loved ones receive in the case of your death are tax-free under Section 10(10D) of the Income-tax Act, 1961.
A ULIP plan provides a range of features, which highlight that it deserves to be in your financial portfolio. Let’s take a look at these top four reasons mentioned below:
- Low charges
A ULIP policy has multiple charges associated with it. However, these charges have significantly reduced after the Insurance Regulatory and Development Authority (IRDAI) proposed new ULIP rules. Here are the four most common ULIP charges mentioned below:
- Policy administration charge
- Fund management charge
- Mortality charge
- Premium allocation charge
In the case of online ULIPs, there is no involvement of premium allocation and policy administration charges. Additionally, there is no involvement of commission charges of any third party or the insurance agent.
- High returns
Due to low ULIP charges, the maximum premium amount is allocated to the funds you decide to select. There is an increase in the returns with the rise in the premium allocation. Due to the hike in the ULIP returns, many investors are considering a ULIP investment.
- Systematic investments
A ULIP plan might provide you with a host of investment options, which would eventually encourage you to develop a systematic habit of investing. Ideally, before you purchase a ULIP policy, many insurers may share the charges, the expected rate of returns, investment value, and so on. Moreover, you can select from the types of available funds based on your risk appetite. The risk involved in these funds ranges from high to low.
- Fund switching
As a policyholder, you can shift your asset allocation from one to another, depending on the market performance. Many insurance companies would allow you to switch between ULIP funds based on your investments, financial portfolio, and market status. Typically, you can switch between funds for capitalizing your investment opportunities as well as for seeking high returns. For instance, if you have chosen a debt fund and you don’t receive satisfactory returns, you can shift to an equity fund to garner high yields.
Today, ULIPs offer much more attractive deals and offers than they did a few years ago. A ULIP Plan is a market-linked product that not only charges you minimally but also offers valuable financial protection to your loved ones. With a ULIP plan, you can also meet your investment needs with ease. A ULIP Plan can be an ideal portfolio with a combination of insurance and investment to achieve your financial goals.