Understand How to Invest in ULIPs

Understand How to Invest in ULIPs

As an investor, you invest your hard-earned money with the motive to earn significant returns over time. You can invest in numerous financial instruments available in the market according to your risk-bearing ability to meet your economic aspirations. However, the major question that arises here is how risky is the investment instrument and how much

As an investor, you invest your hard-earned money with the motive to earn significant returns over time. You can invest in numerous financial instruments available in the market according to your risk-bearing ability to meet your economic aspirations. However, the major question that arises here is how risky is the investment instrument and how much returns you can expect from it. 

Out of the many financial products, a Unit-Linked Insurance Plan (ULIP) has gained immense popularity among investors. This is because ULIP returns in 10 years are much better when compared to most of the financial products. So, let us understand the ULIP meaning first before we talk in detail about its various features and benefits. 

ULIP is a financial tool that provides the dual advantages of insurance and investment under a single plan. The insurer invests part of your premium in equity, debt, or a mixture of both types of funds as per your risk appetite. 

ULIP comes with a mandatory lock-in tenure of five years. It also offers various other benefits that make it one of the most sought-after investment instruments today. Here are some facts that explain why you should invest your hard-earned money in ULIP.

  • Dual benefits 

There is no other investment instrument that offers a blend of insurance and investment. ULIP is an ideal option for investors who want to secure their life and grow their wealth over time. While investing in a plan, you can use the ULIP return calculator to compare the various features, returns offered, and premiums for a particular tenure and then make an informed decision.

  • Flexibility 

ULIP provides convenience in selecting the funds of your choice. Moreover, you can choose from various premium payment alternatives. You can opt for a single, one-time lump sum premium or pay it monthly, quarterly, semi-annually, or annually based on your preference and cash flow. Besides this, if you have surplus capital in the future, you can buy a top-up option. Additionally, with ULIPs, you can invest according to your risk-taking ability. You can select from equity, debt, or both types of funds.

  • Tax benefits 

One of the most popular reasons why you should invest in ULIP is that it offers tax deductions. The premium that you pay towards your ULIP is tax-exempt under Section 80C of the Income Tax Act, 1961. Besides this, the death benefits and the amount received on maturity are tax-free as per Section 10(10D) of the Act. 

  • Withdrawal facility 

ULIPs have a necessary lock-in period of five years, which means that you cannot withdraw funds within this tenure. Once this duration ends, you can use the partial withdrawal feature even before the policy’s maturity to meet any emergency monetary obligations.  

  • Wonderful long-term investment option 

ULIP is a long-term oriented investment instrument that allows investors to earn higher returns and grow their wealth exponentially. Here, you can benefit from the power of compounding. Therefore, it is advisable to stay invested in ULIPs with a long-term horizon of 10-15 years to maximize your investment returns. ULIP returns in 10 years are much higher than the returns offered by bank fixed deposits, Public Provident Fund (PPF), and other instruments.
Investing in ULIPs can help you accomplish your life goals like buying a new house, funding your children’s higher education, and sponsoring their wedding. Therefore, it becomes essential to select the right type of ULIP funds based on your risk tolerance. If you are not sure about this, you can use the ULIP return calculator to ascertain the approximate returns you can earn from various funds and make a wise decision.

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