Long gone are the days when achieving your dreams was only about strong will and hard work. However, in today’s world, substantial amount of money is also crucial in achieving dreams. Be it purchasing a home, financing a new business or even planning for a child’s future; everything requires good financial backing.
But then again, how can one achieve financial stability to achieve these dreams?
Well, the answer is simple – through prudent investments!
When you invest in different wealth-creation instruments, achieving these dreams becomes easier. Such instruments help you in accumulating a good corpus by providing you high returns on your investments. In this article, we will be discussing one such tool, which is the preferred choice of investors today — A ULIP Plan.
What is a ULIP plan?
ULIP is a hybrid investment tool that offers both investment and insurance benefits. The premium that you pay towards your ULIP plan is divided into two parts – one part goes towards providing you with life cover, and the other is invested in market-linked funds.
ULIP proves to an ideal investment option for everyone, be it a risk-taking investor or a risk-averse investor. Yet, if you still have doubts about the benefits of these plans, below are five compelling reasons why you must invest in ULIPs today. Read on to know more.
1. Increase Your Returns
ULIPs offer the option of investing in various tools like equity, debt and balanced funds. You can choose a fund where you wish to put your money based on your risk appetite. If you are an aggressive investor, expecting high-returns, you can invest in equity funds. On the other hand, if you are a risk-averse investor, you can choose debt funds which can provide you with higher security on your investments.
While you may think that mutual funds also provide these options, the feature that distinguishes ULIPs and makes them a better option is their ‘Switching Facility’. Meaning, ULIPs allow you to switch your investments from equity to debt or vice versa according to your changing goals or market volatility. Doing so enables you to obtain a higher return on your invested amount.
2. Enjoy Life Cover
Life is unpredictable; it can throw a curve ball your way anytime. Therefore, it is crucial that you have an adequate life cover. Since ULIP plans provide the option of life over, you can be assured that your family will not have to go through financial difficulties if something were to happen to you. After your demise, the nominee will receive a lump sum amount equal to the sum assured as a death benefit.
3. Achieve Your Long-Term Goals
Amongst all the advantages of investing in ULIPs, its long-term investment benefits are the best. The 5-year lock-in period of ULIPs allows you to inculcate a healthy habit of making regular investments. Thus, allowing you to link your investments with your life-stage needs. Moreover, if you invest in ULIPs for a long-term, you can achieve your long-term goals like buying a house, funding higher education of your children, planning for your retirement etc.
4. Avail Tax Benefits
Taxes consume a hefty amount of your savings and can hinder the financial goals that you have in mind. However, when you invest in a ULIP, you become eligible to claim tax benefits. The premiums paid towards ULIPs qualify under Section 80C for tax deductions (1.5 lakhs per annum). Moreover, the amount received after maturity is also exempted from taxes under Section 10(10D).
5. To Make Partial Withdrawals
In ULIPs, you get the benefit of partial withdrawal, where you can withdraw some amount of money from the accumulated fund before the policy tenure. Therefore, if anytime in future you require money, you will not have to surrender your policy completely. Interestingly, leading insurers like Future Generali also allow investors the option of four free partial withdrawals every policy year.
Read it all? By now we are sure that you have learned that ULIPs can be an important part of your financial portfolio. However, before buying your plan, check the performance of various funds that you are planning to invest in. Once you have done that, we are sure that a unit-linked plan will be a one-stop solution for your long-term goals and financial security.