- ULIPs serve the twin purpose of providing protection as well as giving a long-term investment option
- ULIPs offer favorable returns and give an option to change investment plans depending on the market environment
- Tax efficiency of ULIPs are an added benefit that helps one to expand their wealth
Unit linked insurance plan or ULIP provide you the dual benefit of life protection and investments. The premium which a policy holder pays towards a ULIP gets divided into two portion- one part covers your life insurance and the other part is used as an investment in money market. ULIPs are more advantageous for those who want to invest in it for a longer period of time. Those planning their kids’ higher education, down payment for home, saving working capital for their business plan or saving for retirement will find the returns on ULIP to be quite attractive. Besides providing financial protection for the future, ULIP also facilitates increase in wealth. Here, we have identified four ways in which ULIPs can help you grow your wealth over the period of time:
• Flexibility to switch funds during the policy term
Investing in ULIPs gives you the flexibility of switching funds during its tenure. Depending upon your investment goals and your willingness to take risks, you can choose among types of funds such as growth funds, equity funds, balanced funds, large cap equity funds, income funds, etc. You are allowed to switch funds. You simply need to choose the policy and change the allocation of the funds and then continue them until the term end. ULIPs ensure a hassle-free experience between funds switching and give you an opportunity to come out of an underperforming fund.
• Two-fold benefits
Under Section 80 C of the Income Tax Act 1961, ULIPs offer an advantage of tax rebate up to Rs. 1.5 lakhs. Besides, the investors can reap attractive returns with favorable return rates. Furthermore, the maturity proceeds from ULIPs are also exempted from tax under section 10 (10D). A ULIP helps you save more by saving your tax while also helping you earn market linked returns.
• Ideal for first-time investment
Those investing for the first time, can choose from a variety of minimal to high risk plans depending on their investment goals. The funds are managed by expert fund managers to reap benefits from market movements. On an average ULIPs have been giving a minimum annual return of 8 to 12 per cent, thus proving a good option for first-time investors to earn decent returns and accumulate wealth with regular ULIP renewals over the years.
Overall, ULIPs are an ideal investment option for those looking for long-term wealth creation. It is recommended that before putting your hard earned money in ULIPs, you speak to a financial expert or advisor to get an analysis of how the ULIPs funds are performing.