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. Here, we identify 5 advantages of investing in ULIPs over other investment options.
Choose your investment mix
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 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 have the option of referring to fund ratings of independent investment research agencies like Morningstar before deciding on the type of funds and policy to invest in.
ULIPs like Edelweiss Tokio Life Wealth Plus give you the option of investing 100% of your premium and further allocating additional amount to your policy. This flexibility is not available in other investment plans. You have an option to choose investment strategies based on your profile and risk appetite:
– Lifestage and duration based strategy we will manage your asset allocation based on your age and remaining years to your policy maturity
– Self-Managed Strategy wherein your money will be allocated to your choice of fund(s)
The Plan also offers Rising Star Benefit that ensures that your child’s financial future is secured even in your absence.
Long term investment
For achieving long-term goals like buying a house, buying a new car, opening a start-up, etc, ULIPs prove to be a good option. With the power of compounding, ULIPs provide a better return over a longer time horizon. In case you decide to exit the policy after 5 years what you receive in ULIPs will be far greater than what you would get if you would have only saved that amount without investing. Your money will grow faster over a longer time horizon than let’s say if you only keep it deposited in savings accounts or bank fixed deposits.
Not all investment options provide 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 above, 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.
Overall ULIPs 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.