Volatility is the nature of the market. Market instruments that invest in stocks are more prone to market fluctuations as compared to their counterparts. That is one reason why many investors are wary of investing in stocks. However, there are some wise investment options like a ULIP Plan (Unit Linked Insurance Plans) that cater to the needs of both a risk-taker and a risk-averse investor. For the risk-taker, a ULIP plan allows you to select more equity-based funds and get high returns while assuming high risk. Alternatively, for the low-risk investor, ULIPs allow you to invest in debt-based funds and garner attractive returns while assuming low-risk. It is because of this nature of ULIPs that it is a viable investment option for both types of investors – risk-takers and risk-averse ones.
What are ULIPs?
ULIPs or United Linked Insurance Plans are insurance-investment plans. The best ULIPs in India aim to provide a secure life cover along with attractive returns through market-linked funds. The funds can be based on equity, debt or both, as per your risk appetite and long-term goals, such as retirement planning, buying a house, children’s education, etc. The ultimate objective of a ULIP plan is to function as a wealth creation plan while also providing a life insurance cover.
How does the concept of ULIP insurance work?
ULIPs combine the best features of an insurance plan and investment. When you invest in a ULIP, the insurance company directs your premiums in equities, bonds or balanced funds. ULIPs are managed by professional fund managers who take care of the market-linked investments on your behalf. The insurer levies minimal ULIP charges in return for these services like fund management charge, policy administration charge, etc.
In a ULIP plan, the insurance company specifies a sum assured and death benefit payable to the nominee in case of any unfortunate event during the plan tenure. However, if you survive the tenure, ULIPs offer you a defined maturity sum (comprising the returns on your market-linked investments). On the investment front, the insurance company vests your money in equities, bonds, or a combination of them both. The funds are chosen by you as per your financial needs and risk appetite.
Are ULIPs are a good option for low-risk investors?
Yes, ULIPs are a wise investment option for low-risk investors. Understandably, if you are a risk-averse or low-risk investor, you would be cautious of the market fluctuations and hence, want to invest your money in a product that provides adequate returns at low-risk. You are wary of investing your money in equity-linked instruments.
A ULIP policy caters to both your requirements of – attractive returns and low-risk. In a ULIP, you have an option to choose funds that are equity-based, debt-based or provide a balanced combination of both. As a low-risk investor, you can direct your money in purely debt-based funds or choose an optimum combination of equity and debt as per your risk appetite. This will ensure that you get attractive returns in the long run while also effectively evade possible market fluctuations.
ULIP plans are highly flexible and customisable investment products. As a long-term investor, you have an option to decide where and how your money is invested. If you have a long investment horizon, you can safely opt for equity-based funds and earn higher returns. On the other hand, if you have a short investment horizon, you can opt for a complete debt-based portfolio and get secure returns. Alternatively, you can choose a balance of both equity and debt, depending on your preferences and how much risk exposure you are comfortable with. With a choice of a vast range of funds with different degrees of risk, good ULIP plans offer something for all types of investors.
Additionally, ULIPs also allow you to switch between funds as per your choice. This works well for you because you can control your equity and debt exposure at any time. For instance, if you are heavily vested in equities, you can easily switch to more debt-based funds during a market downturn. Alternatively, if you are a risk-averse investor and started with debt-based funds and minimal equity investment, you have the choice to either make your portfolio completely debt-free or even take advantage of upward market swings by switching to equity-based funds. Typically, insurance companies allow you limited free switches in a year. However, with Edelweiss Tokio Life Insurance ULIP plans, you get unlimited free switches.
Further, there are significant ULIP taxation advantages. The premiums you pay for a ULIP policy are exempt from tax up to ₹1.5 lakh under Section 80C of the Income Tax Act, 1961. The maturity proceeds and death benefit are also free from taxes under Section 10(10D) if your total annual premiums are within the ₹2.5 lakhs limit. If your annual premiums exceed ₹2.5 lakhs, the maturity benefits will be treated as Long Term Capital Gains and taxed accordingly.
Choose Wealth Secure Plus ULIP by Edelweiss Tokio Life
Edelweiss Tokio Life Wealth Secure Plus ULIP investment can be your ideal investment for the future. The plan caters to both low-risk and high-risk investors by offering you the freedom to choose equity, debt, or balanced funds, as per your risk profile and financial objective.
The main benefits and features of this ULIP include:
- The plan grows with you and offers you a life insurance cover until you are 100 years of age.
- Option to cover your children and spouse under the same plan.
- Minimum investment option starting with only ₹1,000.
- The choice to add top-up premiums anytime during the policy tenure.
- Annual loyalty additions beginning from the end of the sixth policy year.
- Wealth boosters additions every fifth year at the end of the tenth policy year.
- Maturity additions at the end of the policy.
- Flexibility to choose payout mode - regular income source during retirement or systematic withdrawal option offering a specific percentage of the maturity amount over a fixed period.
- Freedom to choose payout frequency - monthly, quarterly, half-yearly or yearly.
- The short lock-in period of only five years with permission for partial or systematic withdrawals.
- Option to allocate money in seven diverse funds to boost your returns.
- The choice to take the self-management fund option or expert-management.
- Eligible for all tax benefits on premiums paid, maturity proceeds, capital gains, death benefits and withdrawals as per prevailing taxation guidelines.
Edelweiss Tokio Life Wealth Secure Plus is the right ULIP policyas it offers these competitive features and returns for long-term financial growth. Choose the Edelweiss Tokio ULIP plan and secure your future smartly.
Chirag Iyer - BFSI Enthusiast
Chirag is a writer and an avid reader who loves to drink coffee! His other interests include boxing, karate, and singing.