Unit-Linked Insurance Plans [ULIPs] are attractive investment products for those who want to grow their wealth along with availing of a life insurance cover. ULIPs serve two purposes- investment and insurance. They invest a portion of the funds into investment products and the remaining into covering for your life. ULIPs have a dual advantage and offer various benefits.
If you are a goal-oriented investor, ULIPs are an ideal investment option for you. Bajaj Allianz Life, a leading insurance provider has tied up with India Post Payments Bank for its life insurance service. It offers a goal-based plan, which has numerous benefits for you. The unique features of the plan are the benefits through the ‘Return Enhancer’ and the ‘Return of Mortality Charges’. The ‘Return Enhancer’ benefit allows you the option of an additional 0.5% of each installment due in cases when the benefit is given in the form of installments over a tenure of five years. The ‘Return of Mortality Charges’ is a facility where the company guarantees the cost of life cover on the maturity of the policy, which enhances the value of the maturity amount.
Consumers have always preferred investing in ULIPs and the returns have been consistently increasing. The charges on ULIPs have come down over the years. Today ULIPs are quite different as compared ten years back when it comes to investment. ULIPs are a dependable investment option as they help you in diversifying your investment portfolio. Moreover, they are a viable investment product if you are looking to invest for a long period.
Why ULIPs are an ideal product for you
ULIPs have shown better returns than any other investment or insurance product and this is because of the equity advantage. The premium paid by you will be invested into different asset classes, which will help you gain maximum returns from the investment. The amount of maturity will depend on the performance of the equity market and the tenure of your investment.
With ULIPs, there is an option of switching the funds during the tenure. This allows you to choose from equity, balanced, growth, and income funds as per your risk appetite and your investment goals. You can make four switches in one year without incurring any charges in your ULIP investment and you need to keep a track of the companies in which the fund invests. You need to choose the policy and change the allocation of the funds anytime in the term.
Term insurance offers life cover and helps save tax. However, it offers no returns. With ULIPs, the tax advantage is up to Rs. 1.5 lakh under Section 80C of the Income Tax Act. They will help you achieve your long-term financial goals and provide life insurance coverage simultaneously.
There is a lock-in period of five years in ULIPs, which will help build financial discipline in your life. It is a long-term contract; hence, you can choose to invest in a single ULIP. You do not need to invest in multiple products for insurance and investment purposes, as this one investment product will meet all your financial needs.
Comparison of ULIPs and mutual funds
Many investors who were once inclined towards fixed deposits are shifting to mutual funds and ULIPs. It is important to understand the difference between ULIP and mutual fund. They both are different types of investment products that serve different purposes. Firstly, ULIP is an insurance cum investment product and serves the dual needs of the investors whereas mutual fund is solely an investment product. There is limited liquidity in ULIPs because of the five-year lock-in period and in case of mutual funds, the liquidity is very high because you can withdraw the funds as per your needs and requirements.
ULIPs offer a tax deduction under Section 80C of the Income Tax Act, 1961 for an amount of INR 1.5 lakh. In addition, the maturity benefit is also eligible for tax benefits under Section 10 (10D) of the Income Tax Act. In the case of mutual funds, only the profits from Equity-Linked Savings Scheme (ELSS) are tax-free below the amount of INR 1 lakh as per Section 80C.
Before you make an investment decision, it is important to understand and compare the products. You can compare ULIPs online and choose the one that fits your financial goals. If you are a new investor and aim to make the most of the stock market, you can choose from a range of investment products based on your goal and investment horizon.
ULIPs are much more investor-friendly as compared to when they were first introduced in the market. Today, they are showing steady returns and the cost associated with them has declined. However, it helps to remain invested ULIPs for a long tenure. ULIPs are a great wealth-creating investment option combined with the benefit of life insurance coverage. You can choose the best ULIP plan based on your risk-taking ability and then determine the tenure. You will have to remain invested until the end of the lock-in period to gain maximum benefit from the investment product.