We might have dreams or aspirations that we wish to achieve in the long run. While some of them may be tangible, the others might require a systematic savings approach. Financial protection and adequate investments are the keys to accomplishing all your long-term life goals. Although these two terms can be separately dealt with, a Unit Linked Insurance Plan (ULIP) caters to both of them.
A ULIP is a dual financial product, which is an amalgamation of investment and insurance. It provides financial protection to your loved ones in your absence. In addition to this, you can gain relatively high returns based on market performance, which will help you to combat inflation.
Under a ULIP Policy, there are a host of features, which can be utilized to accomplish your long-term purpose. Let’s begin by understanding each ULIP feature in detail:
- Longer lock-in period
Since a ULIP Plan is a long-term savings product, it should be purchased for a minimum period of 5 years. Every ULIP policy has a lock-in period of 5 years. It is imperative to stay invested in a ULIP policy for as long as possible to realize your life goals. As a policyholder, you should ensure that you choose an affordable premium amount, which helps you to generate a huge corpus for your goals.
- Power of compounding
Purchasing a ULIP Policy at an early stage of life has relatively more benefits as compared to buying a ULIP policy in the later years. You can derive a few major benefits from the power of compounding to achieve your long-term financial goals. Compounding allows you to gain interest on your investment over the due course, which eventually grows your funds. Besides, if you purchase a ULIP policy early, many insurers might even offer loyalty additions to stay invested for a long time.
- Tax efficient
A ULIP is a tax-saving investment option. Due to its tax efficiency, it might have attracted a mass number of people towards it. Under Section 80C of the Income Tax Act, 1961, you can claim a deduction up to Rs. 1,50,000 on taxable income. The maturity process, which you receive on the death of the policyholder are tax-free under Section 10 (10D) of the Income Tax Act, 1961.
- Partial withdrawal
A ULIP plan caters to all your dynamic needs and preferences. When you invest in ULIPs, your insurance company might provide you more by returning all the premium allocation charges several times over the due course of the ULIP policy. Additionally, it would offer a systematic withdrawal option for fulfilling your dreams like planning a dream wedding for your kids, buying a new house, and so much more.
- Other benefits
A ULIP plan is a unique financial product, which aims at fulfilling all your dreams. Therefore, it offers many benefits in favor of its customers. It provides various other benefits like switching feature, multiple fund options, selection of premium payment term, and so forth. As a policyholder, you should select a ULIP policy by carefully analyzing its features and comparing multiple policies.
As highlighted above, a single integrated plan like a ULIP policy can easily meet your goals at every life stage. The improvised ULIP features provide flexibility, accessibility, and transparency to all its buyers. With the introduction of ULIPs, you can invest in equity markets as well as financially protect your families in times of need. With this guide, we are sure that the question of ‘why should I invest in Ulip?’ is out of your mind, and you are particularly clear about ULIP benefits.