22 AUG 2016
4 Reasons Why You Should Invest In Unit Linked Insurance Plans
Everyone has short-term and long-term goals. Short-term goals may be buying that new phone or a new 56-inch plasma television or some new furniture. Long-term goals may be going for that dream vacation, or giving your children a foreign education, or buying a bigger, newer home. Short-term goals may not require you to plan over a longer time horizon. For instance, if you want a new television, you can perhaps save some money for a couple of months and use it as a down payment for buying a television on EMI's. But for long-term goals, you need to plan for a longer time horizon as the amounts involved are larger and also it is something that may not happen in the immediate future. This is where ULIPs come handy.
ULIPs are investment instruments that combine benefits of both life insurance and investments in money markets. The premium paid for a ULIP is divided into two parts; one part goes towards coverage of risk to life and the other towards investment in money market instruments. ULIPs as an investment category has a lot of inherent benefits, especially when you remain invested over a longer period. Let us understand why ULIPs are suitable as a long-term investment plan. Here, we identify 4 reasons why investing in ULIPs scores over other investment options.
Maximise your return on investment
On the basis of your risk appetite, you have the option to choose the mix of market entities that you invest in. You can opt to invest in debt funds if you are a low risk-taker, balanced funds if you are a moderate risk-taker, and equity funds if you are a high-risk taker. You also have the option of investing in balanced funds which can range between debt funds and equity funds. You also have the benefit of switching funds depending on your market outlook. You may refer to fund ratings of independent investment research agencies like Morningstar before deciding on the type of funds and policy to invest in. This allows you to time the markets. You can adopt an aggressive approach when the markets are having a good run and invest in debt funds when the market is on a down swing. This way you can use the market volatility to your advantage.
Over a ten to 20 year period, ULIPs offer in the range of 8.5 – 15%, depending on the category of the ULIP fund like Income fund, Balanced fund, Large Cap Equity fund etc. This is not guaranteed, but something that has been inferred from historical data and trend analysis. This is very close to what Mutual Funds offer over the same time horizon. Hence, ULIPs are a very good avenue for wealth creation. They can help you in raising funds for you to meet your long-term goals and dreams.
Along with returns, another advantage that ULIPs have is tax benefits. Not all investment options provide tax benefits. Since ULIP is a life insurance product it provides tax benefits. For premiums paid, you get tax rebates under section 80C and all payouts received are exempt under section 10D of the Income Tax Act, 1961. So you not only save money, but also are able to see it grow.
As mentioned earlier, ULIP as a product is offered by Life insurance companies. ULIPs fulfil your need for both investment and protection. Though the life cover provided by a ULIP may not be as high as that of a term plan, however, it does provide life cover. In case, you meet with an unfortunate demise, your beneficiary receives the lump sum amount of the Sum Assured. This ensures that the dreams of your family are fulfilled even when you are not there to do it.
Overall ULIPs like Edelweiss Tokio Life – Wealth Accumulation (Accelerated Cover) can be an ideal investment option for your long-term financial goals. It is recommended that you check the performance of individual funds while investing in ULIPs.
20 NOV. 2017
How can ULIP increase your take-home salary
A unit-linked insurance plan is among the better insurance products currently available in the marketread more
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