A ULIP plan is an insurance plan with an investment element that helps you build up a corpus for your future. A ULIP policy can be used for a number of reasons ranging from travel, retirement, home renovation or purchase, child’s higher education, marriage, and more. This is one of the reasons why ULIP insurance is considered apt for goal-based investments. Not only does it offer features that help multiply your money, but it also offers additional advantages, such as ULIP taxation benefits, life cover and financial protection to your loved ones, among other things.
Thanks to the many types of ULIP plans available in the market, ULIPs are one of the best options for goal-oriented people. Here’s how:
1. It offers flexible investment options:
The latest ULIP options in the market offer many flexible features that can suit any risk appetite and align to any and every kind of goal. ULIP plans these days offer a wide variety of funds like equity, debt, and balanced funds. So, you can buy a ULIP plan and invest as per your unique goals in life.
For instance, if you are saving for your child’s higher education and have a large time horizon, you can invest in equity funds. Such long-term investments will distribute the risks, and equity funds will offer you higher returns.
ULIP plans also allow you to switch from one fund to another. So, if you start the policy by investing in equity funds and later on, move to debt or balanced funds if you want. Moreover, you can do so free of cost. Every goal requires a unique investment strategy; a ULIP policy offers this benefit with a variety of fund options.
2. It helps you save systematically:
ULIP insurance plans inculcate the habit of periodic savings that is essential for goal-based investment. A ULIP allows you to pay the premiums in monthly, yearly, or half-yearly instalments. This lets you save for a future need at a pace that you are comfortable with, without having to compromise with your present needs and expenses.
Moreover, ULIP taxation benefits allow you to reduce your tax output and save more. The premiums paid towards a ULIP plan are tax-deductible under Section 80C of the Income Tax Act, 1961. The money you save in tax can be further contributed to your goal.
The maturity benefits also offer tax benefits under Section 10(10D) of the Act, subject to specific conditions and limits.
3. It offers high returns:
As stated above, a ULIP scheme can offer you varied options for investment, such as equity, debt, and balanced funds. Based on your goals and investment capacity, you can select a fund of your choice and earn suitable ULIP returns.
For instance, equity funds can offer high returns at high risk. Debt funds can offer low risk and comparatively lower returns. Lastly, balanced funds can offer moderate risk and moderate returns.
Investing in a combination of these funds, depending on your financial goal, can help you grow the value of your investment fund over the policy term and beat inflation.
4. It eliminates the need for debt:
A ULIP plan is an excellent way to grow your money and cater to different goals. It helps you streamline your money for a future goal, so you do not feel the need to take on debt to fulfil your needs.
It also instils financial discipline as you invest your money towards a future goal instead of spending on unnecessary items.
5. It covers short term and long-term goals:
A ULIP policy can be used for short term as well as long term needs. ULIP plans have a lock-in period of only five years, post which you can withdraw your funds. This makes it easy to use a ULIP for a wide range of goals.
For instance, if you are saving for a relaxed retired life, you can choose a ULIP plan with a long policy term of 25 years. However, if you are saving for a child’s marriage or higher education expenses, you can invest for a shorter term of 10 to 15 years.
What is the best ULIP to buy?
The best ULIP to buy would depend on your requirements and investment strategy. However, generally speaking, the following aspects can help you pick out a suitable plan:
1. Pick a plan with flexible features: A flexible plan can help you alter your investment strategy as per your goal. For instance, if you are saving for retirement, you can start by investing in equity funds and slowly move to debt funds as your retirement age nears. Look for a ULIP that allows you to switch from one fund to another without any additional costs.
2. Look for a plan that offers additions: Additions help you grow your fund’s value and maximise your savings. Some insurance companies offer loyalty, maturity, and booster additions throughout the policy term that help boost your earnings.
3. Opt for a credible ULIP provider: Investments always carry some amount of risk. Hence, it is important to invest in a ULIP plan offered by a trustworthy insurance company. This will ensure that you have a good customer experience. Even in the future, it will enable a hassle-free claim settlement.
To sum it up
ULIP plans are ideal for goal-oriented people as they enable disciplined savings and offer optimal returns. These plans can help you reduce your tax output, eliminate the need for debt, save for a wide range of needs, and secure your loved ones’ future in your absence. They are multipurpose plans that can be altered to your preferred risk and investment strategy. So, no matter the goal you are saving for, make sure to add a ULIP plan to your investment portfolio soon enough.
You can check out the ULIP plans of Edelweiss Tokio Life Insurance and start goal-based investing for short term as well as long term needs.