Why ULIPs: Their benefits and advantages

Dec 05, 2017 | 2 years ago | Read Time: 2 minutes | By iKnowledge Team

The fundamental purpose of investing money is to earn good returns. There are many investment avenues out there that can help your money grow. But ULIP is one that helps you get good returns and give life cover. So, how exactly is Unit Linked Investment Plans (ULIPs) different?

Benefits of ULIPs

Double advantage

In the spectrum of investment options, ULIPs occupies a very unique position. This is because ULIPs offer the dual benefits of investment and insurance in a single package. In other words, it is an investment product offered by life insurance companies.  

The fund manager invests a portion of the amount in various avenues such as stocks or bonds, depending on your choice. The remaining amount is put into a life insurance cover. So in case the policy holder dies unexpectedly, the nominee receives a claim for the sum assured.

Tax benefits

If you are looking for an investment option that offers great tax benefits, then you have come to the right place. Under Section 80C of the Income Tax Act, you can avail tax deductions of up to Rs 1.5 lakh on premiums paid towards investments in ULIPs. Plus, all the returns on your ULIP investments are completely tax-free.

Flexibility

ULIPs give you the freedom to decide where you would like to invest your money. Based on your investment goals and market conditions, you can shift your investments between equity, debt and balanced fund options. For example, if the stock market is experiencing a great amount of volatility, you have the option to shift your investments to debt. This way, you can actively monitor your investments and maximise your returns.

Partial withdrawals

You might want to withdraw a portion of your investments in case of emergency situations. But unlike many other investment options, ULIPs allow you to withdraw a portion of the investment after a specified lock-in period. Make sure you find out how much you are allowed to withdraw because the exact amount you can withdraw varies between different companies. The best part is these withdrawals are completely tax-free.

Long-term investment

As an investor, ULIPs are ideal for you if you are looking for long-term wealth creation. This is due to the fact that the returns on ULIPs are linked to the stock market. As a result, the volatility and fluctuations in the stock market could result in poor returns in the short-term. However, when you invest for the long-term, it is possible to digest the market risks and earn much higher rates of return. So, if you have any long-term investment goals such as funding your child’s education or making a down payment on your house, ULIPs are a good option to finance these goals.

In conclusion, the advantages of ULIPs are several. Their USP is that they provide insurance, help your money grow and save taxes at the same time. Therefore, it is a one-stop option to your family’s security and long-term financial goals.


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