ULIPs are one of the most popular types of life insurance policies. Its distinguishing feature is that it allows investment opportunities while offering protection against life risks. Read on to know more why it is an excellent investment choice to safeguard your financial future.
Over the years, life insurance has evolved significantly. Today, the insurance companies in India offer various plans to suit the varying needs of the people. Among the host of life insurance plans, ULIPs or Unit Linked Insurance Plans have gained immense popularity. One of the main reasons people prefer investing in ULIP over other plans is that it gives the policyholders the dual benefit of insurance protection and investment opportunity under a single policy.
As an investor, if your goal is to build a corpus for the future, here are five reasons why you must have a ULIP plan in your portfolio.
Like other tax-saving investments, ULIPs too have a lock-in period of five years. The duration of ULIP is calculated from the day when the policy is issued; you cannot withdraw your funds before five years. This means it is an ideal investment option for your short-term to mid-term financial goals. Additionally, as you pay the regular premium, it helps you develop the habit of regular savings.
Offer better returns
While ULIPs are primarily an insurance product, its investment aspect cannot be undermined. Historically, these investments are known to offer better returns than any other insurance plans and even the traditional investment options like a bank savings account and recurring deposits.
The higher returns can be attributed to the investments in equity-linked instruments. A part of the premium you pay for the policy is invested in various asset classes through different funds. The maturity amount you get at the end of the tenure depends on the market performance.
Flexibility to switch funds
When you are looking to create a corpus for the future, you would surely want to have the flexibility in your investments. This is where ULIPs score higher than other insurance-based investment plans. It allows you to switch the funds during the term based on your changing financial goals, and risk-taking capacity. Generally, the insurers allow switching of funds at free of cost.
Unlike your investments in shares, you need not constantly keep track of the market performance. You must change the fund allocation, run it until the end of the policy term, and enjoy its benefits in the long run.
Many people prefer investing in a term insurance plan to get protection against the uncertainties of life and enjoy tax benefits. But, a term insurance plan does not offer any returns. If the policyholder outlives the policy term, they don’t get any assured benefit. This is where the ULIPs are a better investment choice, especially if you are trying to save for the future.
Apart from offering life protection and offering tax-benefits up to Rs. 1.5 lakhs per annum, it provides valuable decent returns up to 10 times the annual premium. This can go a long way in saving for your long-term goals.
Ideal investment for all
Today, a lot of people who invest only in traditional investment instruments like fixed deposits are slowly moving towards insurance plans and mutual funds. Over the past few years, ULIPs have attracted several new investors, mainly because the returns from ULIPs are comparable to mutual funds in the long-term.
No matter if you are experienced or an amateur investor, you can easily participate in the money market investment without worrying about fund management. You must determine your investment horizon and the goal attached to it. The ULIPs are known to be very investor-friendly and are an ideal investment choice for all.