Features and benefits of ULIPs you must know about!
Financial planning is a critical activity that every individual needs to take seriously. It is an activity that can help you gain a sense of financial security. While planning finances, you need to consider three essential things. Firstly, you need to select the investment instruments that best suit your financial goals and risk appetite. You also need to invest in instruments that can help you save taxes. One such investment instrument that can help you fulfil several financial goals is a ULIP. Let’s find out what a ULIP is along with its features and benefits.
What is ULIP?
Unit Linked Insurance Plan (ULIP) is an investment product that enables you to invest in the market while also providing insurance coverage. When you invest in a ULIP, you get the opportunity to create a corpus. Funds can be invested in equity schemes, debt-oriented schemes, or a combination of both as per your choice. The investment can help you achieve your long-term investment goals such as retirement planning, purchasing a house, funding your children’s education, etc.
Features and benefits of investing in ULIPs
A ULIP is essentially an insurance plan which comes with dual advantages of insurance cover and investment options. The scheme not only guarantees life insurance through the entire policy term but also enables you to earn high returns on maturity. As an investor, you can choose the funds you wish to invest in. You can invest in equity or debt-oriented funds, or a combination of both types of funds. As such, you can fulfil your financial goals in the long term.
Wide range of investment options
As mentioned above, you can choose the funds you wish to invest in. You should consider your financial goals and your risk appetite while selecting the funds. For instance, if your risk appetite is low, you can invest in debt funds. Investors with moderate risk appetites can invest in a balanced fund, whereas those with higher risk appetites can invest in equity funds.
Taxation and EEE benefits
ULIP investments come in the umbrella of 80C Investments. Thus, you can avail tax exemptions on investments of up to ₹150,000 per annum, as per 80C tax rules. Furthermore, the investment offers EEE benefit or Exempt, Exempt, Exempt benefits. Thus, as per Section 10 (10D), you do not have to pay any tax on the amount invested, the interest or profit earned on investments and the maturity amount.
Partial withdrawal option
ULIP investments are slightly liquid as compared to most other investment options that come with lock-in periods. In case of a financial emergency, you can opt for partial withdrawal. However, withdrawals are permitted only after five years of investment.
Flexibility in investment
ULIPs are designed in a way that enables you to switch your investment portfolio easily. At any time, you can re-examine your risk appetites and switch from equity to debt funds and vice versa. You can also consider market movements and the performance of the funds and make the switch. Most other insurance plans typically do not permit changes.
Final word: Apart from the features and benefits mentioned above, ULIP investments are transparent. They also help inculcate the habit of saving regularly for the long term. So, if you are looking for an insurance-cum-investment scheme, you can consider ULIP investments.
Disclaimer: The contents herein mentioned are solely for informational purpose and shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.