Unit Linked Insurance Plan, more popularly known as ULIP is a life insurance product that provides insurance along with investment. Investment is offered in options such as FDs, stocks and mutual funds. ULIP is one of the best tax saving instruments – it has an edge over traditional insurance policies as it provides the policyholder with the opportunity to invest in a number of eligible investments along with the freedom to customize the plan according to their needs.
Like all insurance and investment policies, ULIP has a number of desirable features, apart from being one of the best tax saving options. Below is the answer to the question: why choose ULIP as an investment option?
ULIPs: The best tax saving instruments, and so much more
In ULIPs, a fraction of the premium goes towards your life cover while the remaining is invested in equity and debt schemes. Hence, you can avail the benefits of both insurance and investments in the same product.
Tax Saving Instrument:
The premium you pay towards the ULIP fetches you a tax rebate under Sec 80C of the Income Tax Act, 1961, every year.
You can change the proportion of premium allocation to life insurance and investment according to changes in your needs and requirements. ULIPs are flexible as they also allow you to switch between your investment funds with relative ease. You even have the option to withdraw a part of your funds if the need arises, subject to certain terms and conditions.
ULIPs invest your money in a number of reliable investments such as bonds and equity. Hence, ULIP gives you the opportunity to earn market-linked returns, which traditional life insurance products fail to provide. You must note that investing in equity funds come with higher risks; do analyze your risk appetite before investing.
A number of insurance companies are attempting to revolutionize the way people regard ULIPs. Of late, ULIPs are one of the cheapest insurance-cum-investment policies in the market. In fact, they are cheaper than mutual funds. Moreover, you can also avail tax benefits under ULIPs.
Long Term Planning:
ULIPs are long term plans and most adapted to individuals who wish to go for long-term financial planning. ULIPs have a minimum lock-in period of 5 years. This feature of the ULIPs helps the policyholder in goal centric planning. Your long-term goals such as buying a house can be fulfilled with growth achieved through ULIPs. ULIPs are undergoing changes and becoming more diverse every day to suit the needs and requirements of more investors.
ULIPs are undergoing changes and becoming more diverse every day to suit the needs and requirements of more investors.