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How Safe is it to Invest in a ULIP Policy

  6/26/23 10:02 AM

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The world of investments can be an unpredictable space. This is why many people still shy away from them and store their money in tools that offer little to no returns. As a result, they are not able to beat inflation, and their money sits idle. However, a ULIP plan is one of the few investment-linked plans that offer great returns along with life cover. A ULIP policy can give your steady growth on your money while protecting your loved ones. With low charges, a ULIP investment makes for a great short term and long-term companion. Moreover, tax on ULIP returns is charged as per long term capital gains tax, and the death benefit is tax-free. ULIPs help manage volatility with several fund options too.

Here is all that you need to know about how safe it is to invest in a ULIP policy.

How does a ULIP plan work?

As you may already know, a ULIP investment plan is bifurcated into two parts. The first part takes care of your insurance needs. This part uses a portion of your premium to secure your loved ones’ future in your absence. The other part is the one that invests in the market, based on the portfolio and funds that you choose. Under this, you can use the ULIP fund switch option and navigate the fluctuating market to gain better returns.

How safe are ULIPs?

A ULIP plan is a safe product in many aspects. The investment-linked planoffers multiple benefits to investors that not only strengthen gains but also ensure good returns. Here are some things to know in this regard:

1.    Multiple switches between debt and equity funds

When you invest in ULIPs, you get to choose the funds you want to put your money in. For instance, if you have a high-risk appetite, you can invest in equity funds. This ensures high gains at an increased level of risk. Most people take this option when they are young and have a large timeline ahead of them. However, if you prefer low risk, you can consider debt funds. These reduce the risk quotient on your portfolio and are preferred when you are close to your goal.

The ULIP fund switch option can be used multiple times during the policy term, helping you benefit from the prevailing market situation. This boosts your returns and increases your profits. Additionally, with Edelweiss Tokio Life ULIPs, you get unlimited fund switches for the entire policy term.

2.    Convenient options to withdraw funds

After the lock-in period of your ULIP plan is over, you can withdraw your funds whenever you like. The insurance company charges some surrender charges and returns the rest of your money to you if you take out money before the maturity date. This increases flexibility. Moreover, ULIP plans also offer systematic withdrawal plans that allow you to withdraw your money monthly, quarterly, semi-annually, or annually. A ULIP pension planis a great retirement tool as you can use a convenient withdrawal system and have a steady income in retirement.

3.    Let you invest systematically

You can opt for systematic premium payments or invest in a lump sum. ULIPs offer affordable premium options. The minimum investment in ULIP can start from as low as ₹1000 with the Edelweiss Tokio Life Wealth Secure Plus plan. This makes it safe to invest in these plans as it distributes risk over a long tenure. Moreover, ULIPs are suitable for all income groups. You can invest as little or as much as you like in a ULIP.

4.    Offer good returns

ULIPs offer additional returns in the form of loyalty additions, wealth boosters, guaranteed additions, etc. These are rewards that get added to your fund over time. Insurance companies like to offer incentives to their investors for staying invested in the plan for a long time. These rewards can substantially increase the value of your fund. They also enhance your earnings.

5.    Give benefits in terms of tax on ULIP

ULIPs offer many tax benefits. The premiums paid towards the ULIP policy are tax-deductible under Section 80(C), and the death benefit in the ULIP planis tax-free under Section 10(10D). Moreover, the returns earned are taxed as per long term capital gains taxes. However, the tax on maturity benefits is only applicable if the total annual premiums exceed ₹2.5 lakhs and the policy was bought after 1st February 2021.

6.    Keep your loved ones protected

The funds invested not only offer financial growth and fuel your personal goals but also ensure that your family is taken care of in your absence. A ULIP provides you and your loved ones with safety. The sum assured offers them a financial cushion in their hour of need so they can continue living a life of dignity and luxury.

Wealth Secure+ – Edelweiss Tokio ULIP Plan

The Edelweiss Tokio Wealth Secure+ Plan is a safe policy that gives you the means to achieve several financial goals. The plan is dependable, affordable, and offers multiple features that can contribute to your financial growth. Here’s how:

  • The plan offers loyalty additions and maturity additions to enhance earnings and thereby increase financial security.
  • There are seven diverse funds that let you invest as per your risk capacity.
  • The plan comes with three options:

» Individual Option: Helps individual investors meet their financial goals.

» Joint Cover Option: Helps couples achieve joint goals.

» Child Option: Helpful for parents who are saving for their kid’s needs.

  • The ULIP comes with a systematic withdrawal plan with options like monthly, quarterly, semi-annual, or annual payments.
  • The premiums are affordable and start from just Rs. 1000 per month.
  • There is an option to add top-up premiums.
  • The plan offers the option to invest for a minimum of 5 years, making it an ideal short-term investment.
  • The plan offers tax benefits under Section 80(C) and Section 10(10D).

To Sum It Up

ULIPs are entirely safe instruments that can give you peace of mind and security for life. They safeguard your family and let you increase your financial worth with diverse fund options and affordable premiums. They also allow you to adjust your risk as per your changing income, needs, and requirements.

If you are looking for a safe investment option, a ULIP policy can definitely fit the bill!


Swati Tumar  - Travel & Finance Writer

Swati is a Writer in the day and an illustrator at night. Among her interests, she is quite fond of art and all things creative. She often indulges herself in creating doodles, illustrations, and other forms of content. She identifies herself as an avid traveler and shameless foodie.

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