Are you considering insurance but don’t want your money to sit idle after paying heavy instalments? We get you, especially when the cost of living is increasing every few days while salaries are shrinking. This creates the need for a financial tool that offers good value for money.
In such scenarios, a good solution is to opt for ULIP, a Unit-Linked Insurance Plan that combines insurance and investment components to give you market-linked returns. However, ULIPs can vary depending on the insurance company offering it.
To give you a deeper understanding of ULIPs and what they entail, here’s a rundown of 5 key features and benefits one must look out for while investing in a ULIP plan.
What is ULIP?
ULIP, or Unit Linked Insurance Plan, is a financial product that combines life insurance with investment options, allowing policyholders to invest in a range of funds while providing a life cover.
For an in-depth understanding of ULIPs;
5 Essential Features & Benefits of ULIP
ULIP is a good choice for you if you are looking to grow your wealth over a period of time. Not only does it offer financial flexibility, but provides multiple beneficial features like:
1. Market Linked Returns
Market-linked returns are a crucial aspect of Unit-Linked Insurance Plans (ULIPs). This allows you to create long-term wealth by offering good returns on your investments. Besides, Unit-Linked Insurance Plans or ULIPs allow you to select from a wide range of market-linked funds like equities, bonds, debt and other hybrid options.
When you invest in these funds, you automatically become eligible to avail market returns based on market performance.
2. Tax Saving
Unit-Linked Insurance Plans (ULIPs) offer tax benefits to you depending on your income. When you put money into a ULIP, you can lower your taxable income (up to Rs. 1.5 Lakhs) under Section 80C of the Income Tax Act.
The good news is that when your ULIP investment grows, the money you receive from it, whether as a maturity amount or a death benefit, is tax-free up to a certain limit under Section 10(10D)1 as per the prevailing tax law provided that the sum assured should be at least 10 times the annual premium paid
In short, ULIPs help you save on taxes when you invest and let you keep all your profits without any tax deductions when you take the money out. It's a smart choice for your finances and your peace of mind.
3. Insurance Component
Insurance is a crucial part of ULIPs. This insurance aspect ensures that your family is financially protected if something unfortunate happens during the policy period. The amount the family receives in case of the death of the life assured serves as a financial backup that can pay for their needs, debts, and secure their future.
4. Investment Component
When you pay for a ULIP, some money goes into different investment funds. These investments can help your money grow, but how much it grows depends on how well these funds perform over time.
Before you decide to invest in a ULIP, it's essential to think about a few things. Consider the risks you're taking, the charges you'll have to pay, and the potential returns you might get.
5. Partial Withdrawal
Partial withdrawal is an essential benefit of ULIPs. It allows you to take some money from your investment to cover immediate financial needs before the policy matures without cancelling the entire policy.
There is a lock-in period (typically five years) and a certain amount of money that must remain in the policy after withdrawal. The insurance company determines the maximum limit for the amount or percentage that can be withdrawn from the fund value.
Conclusion
In summary, ULIPs are a powerful financial product that can help you grow your wealth over the long term, save on taxes, ensure your family's financial well-being and offer flexibility when needed.To make the most of your ULIP, it is crucial to consider these key features, align them with your financial goals, and seek professional guidance when necessary.
Remember, reviewing your policy, seeking expert advice, and staying informed will gaurantee that your chosen ULIP meets your unique needs.
Sources
https://incometaxindia.gov.in/communications/circular/circular-2-2022.pdf
