In these uncertain and unprecedented circumstances, it is essential for an individual to start and pursue financial planning. Till an individual is in his/her early 20s, the expenses and every decision is being looked at and taken by parents.
But, the moment one starts earning either via a job or becomes a professional or is a self-employed person, slowly and gradually, this decision starts shifting on him/her. This is the time wherein one should take earnings seriously and start with financial planning. Moreover, at this stage, it is equally important to plan savings too.
Thus, one can explore a vast range of avenues such as mutual funds, stocks, Systematic Investment Plans, Life Insurance/Term Insurance, etc. Amidst all these, there is one such investment which definitely catches the attention of the ULIP Plan. So, what is a ULIP Investment Plan or a Unit Linked Investment Plan? Read more and know about it.
What is a ULIP or ULIP Investment?
ULIP or Unit Linked Investment Plan is a comprehensive life insurance policy that imparts dual benefits to the policyholder, which helps in fulfilling the long-term goals of the policyholder. This life insurance plan protects and safeguards the family members in facing any unforeseen situations. So, why is ULIP good for long-term investment?
In a ULIP policy, the policyholder has to pay a premium on a regular basis. One can either pay the premium amount either monthly or annually. So, in ULIP, the premium paid by the policyholder is further divided into two parts. Some part of the premium is kept and considered for the life cover.
The remaining amount of the premium is invested in the funds wherein the policyholder chooses to invest. The policyholder can either invest in debt, equity or a mix of both. It completely depends upon the risk-taking capacity of the policyholder. This is why ULIP is considered a combo life insurance plan. With such features and benefits, ULIP is considered a reliable investment avenue.
How is ULIP a Safe Investment Option?
There are several insurance service providers that provide some of the best ULIP Plans in India. For example, the Param Rakshak plan of Tata AIA policy is one of the best ULIP plans that provide lump-sum benefits, market-linked returns, accidental benefits, etc. The following are the key reasons why one can consider ULIP as a safe investment option:
Risk taking capacity
The policyholder can invest in ULIP considering his/her risk appetite. If the risk-taking capacity is low, then they can consider funds with low risk and vice versa. But where risk is high, there is more probability of gaining a high return. Also the policyholder can also shift from one fund to another without paying any extra charges.
Liberty to decide the insurance cover
In ULIP, the policyholder has the liberty to decide the life cover amount that he/she wishes to insure. The minimum amount of life cover in a ULIP is 10 times the premium paid annually. However, one can first see the insurance company’s plan and then finalise the insurance coverage amount.
Select the investment type
Where one portion of the ULIP premium amount is saved as a life cover, a part of the premium is invested in different funds such as debt, equity or a combination of both. Thus, in a ULIP, the policyholder has the freedom to decide his/her investment type. Plus, the risk appetite of the policyholder will definitely differ. Thus, they can then take a decision considering the risk aspect.
Apply for partial withdrawal
In ULIP, the policyholder can withdraw a partial amount which has been invested in the plan after the lock-in period is over. This will help the policyholder in dealing with the current and immediate expenditures such as children’s fees for secondary, higher secondary, graduation, family vacation, etc. There is no charge or fees levied on this withdrawal.
As per the Income Tax Act, 1961, no tax amount will be charged on the money that he/she has earned by ULIP investment. This benefit can be reaped at different stages. In stage 1, there is an advantage on entry. Here, under Section 80C, the policyholder will receive tax benefits on the payment made as a premium. In Stage 2, there is an advantage of exclusive switching. Here the switch between equity and debt can be made tax-free. In Stage 3, there is the advantage of exiting. Under Section 10(10D), the policyholder will get a tax-free maturity benefit.
ULIP investment plan is one of the safest and most reliable investment avenues. Now that you know the reason, you should not wait for any more. Simply choose a fund you wish to invest in or connect with an expert to gain further advice.