In order to build a huge sum of money for your future, what do you need? Apart from the allocation of funds, you obviously require the right type of investment plan to keep you covered throughout. One such plan that has been making headlines after the reintroduction of Long term Capital Gains Tax [LCGT] is the Unit Linked Insurance Plan [ULIP]. Due to its investment and insurance offerings under a single plan is what has made it a go-to option.
There is never a right or wrong time to invest in ULIPs. It is advisable to invest in this plan at an early stage of life due to numerous factors and benefits. When you invest early, see to it that you have positive cash flow with all the past debts cleared as well as emergency funds for security purpose. Once these two factors are covered only then move forward to the investment procedure as it is a safety net for all your unplanned costs.
Take a look at these reasons that will make you invest in a ULIP Insurance at an early phase of life
What is a ULIP Plan?
Being a new-age product, ULIPs attract a majority of investors due to its high returns and low costs. These newly reformed ULIP Policies allow its investors to attain all their long term financial goals by offering them with the right balance of investment discipline, tax benefits, and so forth. Unlike mutual funds, the expenses that are incurred on ULIPs are much lower.
Investment in ULIPs is definitely worth all your hard earned money. But there are certain things that you should consider before opting for a ULIP Policy. A right ULIP Plan will ensure maximum benefits once you have all the factors in place. Hence, go through these factors before making an investment decision:
- Lock-in period
- Tax benefits
- Multiple funds option
- Charges
- Death & maturity benefits
Reasons to invest in a ULIP Insurance
1. Online ULIPs
Unlike offline ULIPs, it is an affordable means of investment which implies to lower costs as well. When you invest in online ULIPs, it might provide you with zero cost since it does not include any distribution as well as commission charge. Additionally, a majority of companies are reversing on the mortality rates of online ULIPs as well. This ensures that you not only save yourself some money but also time as you won’t be chasing insurance companies for help.
2. Rupee Cost Averaging
Typically, a ULIP Policy works on a concept termed as ‘Rupee Cost Averaging’. Under rupee cost averaging, the investor buys specified units of funds which are averaged. This in turn tones down the guessing game as the investor lets him invest in a fixed sum regardless of the market scenario. With the help of rupee cost averaging, investor purchases more unit when the market is low and vice versa.
3. High-Value Life Cover
When you invest in a ULIP, you are keen to receive a life cover which might be of high value. A life cover provides you with either a sum assured or a fund value, whichever is higher. Under ULIPs, a life cover might be 10 times of the premium that you invest in. The higher the premium you pay, the higher is the value of your life cover.
4. Tax Benefits
Avail the tax saving benefits on your ULIP Plan by paying the premiums. ULIP tax benefits are valid under Section 80C of the Income Tax Act, 1961 wherein the investor can avail tax benefits on investments up to Rs. 1.5 Lakhs. Additionally, the capital which you earn is also exempted from the payment of taxes.
5. Switching policy
Investing in ULIPs simply means availability of switching from one fund to another. A ULIP Policy allows you to invest in only those funds based on your risk appetite. Even if you’re a risk-averse investor, ULIPs offers switching funds. As an investor, you can opt to switch funds to enhance your fund value.
Now that you know the significance of investing in a ULIP, when do you plan to invest in one? Whatever you decide, see to it that you invest in it to the soonest in order to enjoy the benefits of a low-cost ULIP. A ULIP investment is best optimized when you keep the current market scenarios in mind. In the end, it is better to invest in something at the right time than not do it all!