Investing in a Unit Linked Insurance Plan (or ULIP) helps you provide financial aid to your family in times of need and secure a thriving future for them. ULIPs offer various advantages over other traditional insurance and savings plans. To start with, a ULIP plan provides the flexibility of investment, which is lacking in other life insurance plans. Moreover, you can earn significant inflation-adjusted returns on your ULIP investment over the plan tenure.
To help you decide on buying a ULIP or Unit Linked Insurance Plan, here are some prominent benefits to consider:
1. Flexible Investment Options
ULIPs offer a wide range of investment options with different risk profiles. You can choose between low, medium and high-risk investment options, based on your financial needs and requirements – under the same policy. Additionally, you have the flexibility to switch between different fund options throughout the policy term, without incurring any additional expenses. Overall, ULIP plans provide you with the flexibility to design a financial portfolio that helps make the most of investment opportunities, by overcoming any changes in your income flows or the external environment.
2. Transparent Policy Structure
Before buying a ULIP, you can take your time in reviewing and understanding the different aspects of the plan including the value of an investment, charge structure, and expected rate of returns, for the entire policy tenure. Similarly, you receive the daily NAV (Net Asset Value) reporting and quarterly investment portfolio reports, along with the annual account statement, so that you can keep a tab on your investment portfolio at all times.
3. Comprehensive Tax Benefits
ULIPs are primarily considered as life insurance plans. Thus, you are eligible to receive tax-saving benefits on the premium paid towards the ULIP plan. You can claim tax deductions up to Rs 1.5 lakh of the premium paid, as per Section 80C of the Income Tax Act 1961. On the other hand, all maturity and death claim payouts are tax-exempt under Section 10(10D) of the Act.* Additionally, ULIP investments are not impacted by the Long Term Capital Gains (LTCG) Tax, thus being more tax-efficient than several other alternative investments.
*Tax saving benefits offered under ULIPs is subject to revisions as per prevailing tax laws
4. Long Term Wealth Creation Opportunities
Investing in a ULIP plan is ideal for long-term wealth creation. The returns on ULIPs are linked to the stock market; therefore, you can earn a significantly higher return on your investments, provided you opt for extended investment tenure. When you decide to invest long-term in a ULIP plan, you can ensure not only comprehensive life insurance coverage for your family, but also accumulate significant wealth without worrying much about the market fluctuations. In this way, ULIPs can help you fund your long term goals, for example, buying a house or funding your child’s higher education abroad.