Is it safe to invest in ULIPs?
When it comes to growing your wealth with keeping your future in the mind, investment is the option for many. Investing in markets and various financial instruments help the investors in growing their wealth overtime. As a potential investor, you can opt for any one of them. However, there are instances where someone might be looking for a safer investment option.
In such scenarios, you can opt to invest in a ULIP. ULIPs have become popular among investors in recent times. However, there is still a lot of scepticism when it comes to investing in them. Read on to know why ULIPs can be beneficial for you as an investor.
Understanding ULIPs
What is ULIP ? ULIPs come under the life insurance category. In simple terms, it is a Unit Linked Insurance Plan where you as an investor get to enjoy the dual benefits of insurance and investment under the same plan. The premium that you pay towards the policy is used to finance both these components of the plan. In the investment component, you get to investment in equity, debt and balanced funds. Equity and debt funds have different risk factors and rate of returns.
In the insurance component, the dependents of the policyholder are provided with a life cover to remain financially protected from life risks. If the policyholder were to pass away during the term of the policy, they would receive the death benefit from the insurer. They are also entitled to the maturity benefits from the plan post maturity.
Should you invest in a ULIP ?
It is understandable that as a first-time investor, you would want to know more about a ULIP before investing in it. Listed below are few benefits of ULIPs:
1. Tax benefits
You get to enjoy various tax benefits on ULIPs. Under Section 10(10D) of the Income Tax Act, annual premium payments of up to Rs.2.5 Lakhs are eligible for tax deduction as per the changes in the new tax regime. This deduction is applicable for ULIPs bought on or before !st February 2021. However, if you have purchased your policy before 1st March 2012, premium payments of up to Rs.1.5 Lakhs are eligible for tax deduction under Section 80C of the Indian Income Tax Act. Additionally, the maturity benefit under the policy is tax-free under Section 10(10D) of the Income Tax Act.
2. Different types of funds to invest in
If you want to opt for an investment option with a lower risk factor, you can choose to invest in debt funds. The risk is lower than equity fund and the returns are also medium. If you want the benefits of both the funds, you can invest in both equity and debt funds, wherein the returns would be low to medium.
3. Managing life goals
Life goals vary for each individual. Owning a house in the future, saving for child’s education or marriage, or wanting to take a vacation abroad are some of the life goals people have. The maturity benefits that you would receive once your ULIP policy matures is based on how much money you invested in it, when you started investing in it, and what type of funds you invested in. These benefits can help you in fulfilling your life goal with ease.
4. Life cover
While investment is one benefit of the plan, the other half is the insurance cover that you receive from the plan. Your loved ones are financially protected from different life risks with the help of a life cover. If you were to pass away during the policy term, they would receive death benefit from the insurer. This amount can help them manage necessary cost of living without the risk of facing financial instability or uncertainty.
These benefits highlight the safety that you would get as an investor when you in invest in ULIPs. To get more information, you should get in touch with your insurance/financial advisor. To see how much you would need to invest and what your returns would be, you can use the ULIP calculator.
