It is important to understand the meaning of ULIP. A unit-linked investment plan, also known as a ULIP, provides you with both life insurance and market-linked investment returns under a single plan. Being insurance products, ULIPs are largely unaffected by the 2018 reintroduction of the Long-Term Capital Gains (LTCG) tax on direct equities and equity mutual funds. Furthermore, there are no taxes owed when a ULIP plan participant switches between the equity and debt fund alternatives.
ULIPs Are an Excellent Investment Option Because…
A ULIP plan combines the advantages of insurance and investing into one financial product. In any event, they take precedence over either investing or insurance separately. While you are covered by a life insurance policy, you may also accomplish major life goals by choosing to invest in ULIPs and receiving market-linked returns.
- Various funding options
You can choose from a range of fund options with ULIPs. These choices can consist wholly of equity, debt, or a mix of the two in different ratios. You can choose or move to a fund that can assist you in adapting to the new situation depending on your risk tolerance and changing living circumstances. Debt-focused funds are better suited for risk-averse people who want assured returns, whereas equity-focused funds are better for people who have a higher tolerance for market volatility.
The ULIP calculator is a simple tool that you can use to predict the return you might get at maturity by entering a few details.
- Transparency
An overall transparent financial product is a ULIP plan. This implies that you regularly receive updates on the performance of the fund and all fees assessed by the insurer. Also, the ULIP NAV and the historical returns make choosing a ULIP plan simple.
- Effortless Handling of Your Funds
You also receive larger returns and have less daily financial management stress. It then becomes up to the fund management and insurance firm to decide. You can be certain that your money is placed in securities that are better suited to your risk tolerance when you work with devoted fund managers who are experts in fund management. With straightforward tools like the ULIP NAV, policyholders may quickly review their portfolios and the performance of the funds.
- Reduced surrender fees
Charges associated with relinquishing a policy are known as surrender charges. You can quickly get rid of a policy that no longer makes sense for your financial portfolio if you find yourself in a situation where you feel trapped by it by paying the surrender fees (in the initial five years). These costs are extremely fair in the case of ULIPs.
- Liquidity
Due to the ability to make partial withdrawals of money to cover any unanticipated occurrences and crises, ULIPs are a very flexible investment instrument. Also, you can view the ULIP NAV of the particular fund on the website of the insurance provider. By doing this, it will be simple for you to match your investments and insurance coverage to your total needs.
Advantages of Purchasing ULIPs:
ULIP plans provide policyholders with a number of benefits, such as:
- Linked Market Returns
You can receive market-linked returns with a ULIP plan. Your subscription payment for the plan is split up into various market instruments, including equity- and debt-focused funds, in variable amounts. As a result, there is a probability that your investments will provide high returns. The data from the ULIP NAV can also be used to monitor the success of your investments and make sure you have the right combination of high-performance fund choices.
- Tax Advantages
Under Section 80C of the tax code, the premium for a ULIP plan is deductible. Also, ULIP gains and income are tax-free. Even short-term gains from transferring between other funds are tax-free. The death benefit received by your beneficiary in the event of any occurrence is exempt from taxes under Section 10 (10D). **
- Future Protection for Your Children
To increase market returns, you can use ULIPs to invest in market-linked stock and debt funds. In turn, doing so would assist you in building a corpus that you might utilise to safeguard your child’s future. You can utilise the funds to pay for your child’s schooling, marriage, and any other costs that could occasionally arise. Hence it is essential to understand the meaning of ULIP.
Even if you may not feel the need to manage your finances or save money when you are young, you must realise that your obligations will change as you become older.
You can use a ULIP calculator to estimate future returns and the value of a ULIP investment.