5 Reasons Why ULIP plan Is Important

5 Reasons Why ULIP plan Is Important

As an investor, one often looks out to maximize their return on capital invested, along with ensuring capital protection. The idea of investment differs from person to person, based on their goals and financial objectives. For example, a person looking for immediate funds can avoid investing in Public Provident Fund as it has a lock-in of 15 years. A person looking for long-term wealth creation and corpus creation for child education or marriage can go for long-term lock-in investments that are give compounding returns. One must-have investment in every person's portfolio is an insurance product.

One form of an insurance investment policy is called a ULIP. ULIP or Unit Linked Insurance Policies are market-linked products, similar to a mutual fund, which however involves an element of a life cover too. A person subscribing to a ULIP gets market-linked returns and enjoys a life cover too during the policy term to secure the family in case of any death during the policy term. ULIPs invest in different funds offered by their respective insurance companies, which may be selected by the investor based on their needs. They can invest in large caps, small caps, sectoral investments, fixed income earning products, and other designed funds.

Long-Term Wealth Creation

01

ULIPs have a premium payment term and a lock-in period of 5 years. Money invested since inception can be withdrawn after the end of 5 years. This leads to disciplined investment amongst the investors.

Also, there is no redemption pressure on the fund managers of the ULIP prior to 5 years therefore they ha=-ve the liberty to invest more without any sizeable amount in a redemption reserve to meet unforeseen redemptions as well. This in turn leads to higher returns on the product.

Life Cover

02

ULIPs along with providing variable returns also provide a life cover to the insured. Life cover is a critical investment that protects the family in case of any death.

This adds to the financial security of the family. Life cover can be enjoyed throughout the term of the policy until the ULIP is redeemed.

Tax-Free Returns

03

One of the main advantages of investing in a ULIP plan over a mutual fund presently is that the returns of ULIP are tax-free in nature.

There are no capital gains that are attracted over the Long Term Capital Gain earned on redemption, unlike in the case of other capital investments.

Customis able Investme nt

04

ULIPs permit the investor to change their funds and investment strategies year on year. For example, if a person invested in a large-cap fund at the beginning of the year, they can shift to any other fund like a mid or a small cap or a fixed earning fund multiple times. They can amend and customize their portfolio allocation as well.

Adjustabl e Investme nt Amount

05

The amount of ULIP plan premium can be increased or decreased in subsequent years.

As the income of the person rises, they can opt to add an additional amount to their existing ULIP to increase their investment size.

If you have any questions about ULIP plans or want to invest in ULIP, reach out to the experts. Plan your taxes in advance by investing in ULIPs.

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