We all have different goals that we want to achieve. Several of these goals are financial or require financial aid. When you are planning your investments and securities, paying high insurance premiums may seem overwhelming. It would restrict the amount of money that you would otherwise invest towards your financial goals. There is a type of insurance plan, called a ULIP (meaning a Unit Linked Insurance Plan), that will give you the best of both worlds.
What is a ULIP?
It is an insurance plan that provides life insurance and acts as an investment, too. It utilises the premiums that you pay to provide you with life insurance. It also invests a part of the money received in financial instruments. A ULIP ensures that you have a life cover against emergencies some money alongside that grows with time.
Why should goal-oriented individuals invest in a ULIP?
ULIP, being an insurance plan, has the elements of investment too. There are several types of ULIPs available as they are quite popular amongst goal-oriented individuals. Here is why –
Provides life cover
In case of your demise, a ULIP offers death benefits to your dependents. The sum that they receive will give them a sense of financial security in your absence. It is a great tool to secure the lives of your loved ones, so that they do not face any financial troubles in your absence.
Offers huge returns on investments
When you select a ULIP scheme, you can choose the instrument where you want your money to be invested. Equity, debt, or balanced funds, the choice is yours. Based on what your goals are and your ability to take risks, you can choose the fund of your choice. Risky-taking individuals usually opt for equity plans, where you get high returns at high risk. On the other hand, debt funds are safe investments and comparatively have lower returns. If you want to balance both, balanced funds are an optimum choice, as they involve moderate risk and offer moderate returns.
Enables the habit of saving
When you buy a ULIP plan, there are premiums you pay as recurring instalments. Usually, you can choose how you want to make the premiums – monthly, half-yearly, or yearly. There are several ULIP return calculators available online where you can estimate the returns on the premiums that you pay. When you pay premiums on ULIP, you are also saving money aside, from which you will get returns later.
Offers flexibility as an investment
While the meaning of a ULIP in your financial portfolio remains the same, irrespective of the kind of plan you purchase, know that it is important to purchase the right one from variety of ULIPs available in the market. Based on your earnings and risk-taking abilities, you can choose the one that aligns with your goals. ULIPs usually allow you to switch from one fund to another. This option is quite helpful because as you grow, your financial goals might change. This can be addressed by the flexibility offered by ULIPs, making them one-of-a-kind investment options.
Helps you to save taxes
When you are looking for financial instruments that help you save taxes, ULIP is definitely worth considering. The premiums that you pay on ULIPs are eligible for deduction under Section 80C of the Income Tax Act. Also, the amount you receive when your insurance plan matures will be exempt under Section 10(10D) of the Income Tax Act. Hence, the money that is invested in these funds and the returns that you get from this fund both have tax benefits.
Assists in meeting long-term and short-term goals
As an individual, you may have different long-term and short-term goals. Like, savings for a house that you want to buy within the next 10 years versus building a portfolio for your retirement. Based on your goals, you can choose your ULIP plans. There is a minimum lock-in of only five years in ULIP. For your long-term goals, you can opt for ULIP plans of 25 years. Whereas, for your short-term financial goals, you can choose the 10-year plan. ULIP will help you meet your goals; thanks to the sum you receive after the maturity of your plan. Use the ULIP return calculator to know precisely the amount you will receive when your plan matures.
As a goal-oriented individual, ULIP is a perfect fit because it provides you with a life cover and gives good returns too. It helps you save taxes and save money, which you can further make use of to achieve your goals. Additionally, the different ULIP options will help you choose a plan that is directly aligned to your goals.
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