June 13, 2024

Paull Ank Ford

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Everything You Need to Know About ULIPs

It is essential to invest in financial products that help in wealth generation to build a significant corpus in the long run. Doing this can help you achieve your monetary aspirations, and you can live a financially stress-free life. Inflation can deeply affect your finances. So, it is necessary to save and invest to live through economically challenging times. Investments will help you grow your wealth. However, you need to invest in the right financial product. 

Unit-linked Insurance Plan (ULIP) is an investor-friendly alternative available today. It offers higher returns when compared to other products like Public Provident Fund (PPF), bank fixed deposits, and Post Office savings scheme. If you are eager to know the ULIP meaning, read further. 

ULIP is a financial instrument that provides you with  a package of life insurance and investment in a single plan. Therefore, it is one of the most sought-after investment instruments. ULIPs have a lock-in period of five years that allows your funds to grow over time. They have a long-term orientation, so it is recommended to stay invested plans for at least 10 to 15 years to maximize the investment returns. 

Advantages of investing in ULIP

If you are wondering why you should invest in ULIP now, here are some of its plus points. 

  • Provides life cover 

Life is unpredictable and uncertain. Therefore, it is essential to have a life cover to ensure that your family is financially independent even when you are not around to take care of them. ULIP is a life insurance product that also has an investment component to help you increase your wealth in the long run.

  • Offers tax deductions

Tax exemption is one of the best ULIP benefits that you can reap. As per Section 80C of the Income Tax Act, 1961, you can claim a maximum deduction of INR 1.5 lakh every year on the premium that you pay for the ULIP. Additionally, Section 10 (10D) of the Act provides a tax advantage on the maturity amount or the death benefit. Besides this, the returns from ULIP are not subject to long-term capital gain tax. 

  • Permits switching of funds 

ULIP gives you the flexibility of switching between funds. Here, you can move from equity to debt funds or vice-versa based on the market’s performance. If the market is going through a rough time, you can safeguard your investments by shifting them from equity funds to debt funds. On the other hand, if the market conditions are favorable, you can switch from debt to equity funds. With this, you can earn higher returns on your investment. This ULIP benefit gives this investment instrument an edge over other products.

  • Allows partial withdrawal 

ULIPs have a mandatory lock-in period of five years, and after its completion, you can withdraw funds partially to meet any emergency monetary needs.

  • Ensures transparency 

ULIP is a transparent investment avenue, as you can select your choice of fund, like equity or debt fund, and invest as per your risk-taking capability and the current market scenario.  

  • Helps to build a corpus for long-term goals 

ULIP can act as a catalyst, as it can aid you in financing your long-term life goals, such as funding your children’s education and wedding or buying a new house. You can earn lucrative returns if you remain invested for a long period of approximately 15 years. 

Now when you know the ULIP meaning and have an idea about its unique highlights, it is advisable to choose the right fund and start planning for a better financial future.