Advantages Of A ULIP Plan You Should Learn
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In today's environment, insurance has become a need. Most individuals, on the other hand, do not buy insurance because they feel it simply provides life insurance and has little investment potential. However, insurance plans like Unit Linked Insurance Plans (ULIP) try to provide both life insurance and wealth growth to policyholders.
Insurance Plan with Units (ULIP)
A Unit Linked Insurance Plan (ULIP) is a kind of insurance that may also be used to invest. It is a sort of plan that provides you with the security of life insurance while also allowing you to manage your finances. It accomplishes the goals of wealth accumulation and life insurance. An investor who wishes to safeguard his or her beneficiaries generally creates a ULIP. The insurance company deducts a percentage of your investment for life insurance and invests it in a fund that is suited to your long-term goals, such as retirement planning, children's education, or any other key event, depending on your decision. A ULIP plan's assets are managed to accomplish a certain aim, comparable to mutual funds. The strategy establishes a net asset value, which is then market-linked and increases in value when the value increases. When an investor purchases units in a ULIP, he or she is doing it in concert with other investors. Investors can choose to buy shares in a single strategy or diversify their portfolio by acquiring shares in several market-linked Unit-linked Insurance Plans.
ULIP Benefits
ULIPs have grown in popularity as a result of their ULIP advantages. Some of the most important benefits of a ULIP plan include:
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A Single Offering with a Double Advantage
ULIPs combine insurance and investment into one convenient bundle. It meets two needs at once, allowing you to relax. You will obtain low-cost insurance coverage on the one hand, and you will be able to invest in funds of your choosing on the other. A ULIP offers your family guaranteed security and the extra benefit of market-linked investments.
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More Investment Options
Another benefit of ULIP plans is that they allow you to personalize your investments to your risk tolerance and financial goals. If you want to take a low-risk approach to retirement investing, bonds are a wonderful choice. If you have a modest risk tolerance, balanced funds are an excellent choice. You may opt to invest in equity funds if you are a high-risk investor. You may, however, determine an appropriate ratio for each type of investment based on your needs.
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Flexibility
The opportunity to switch your portfolio between debt and equity-based on your risk tolerance and market knowledge is one of the most significant benefits of ULIPs. Long-term goals should be supported. The ULIP plan's characteristics are designed to provide you with compound growth. As a result, it is a fantastic alternative if you have demanding long-term goals, such as buying a house or a new automobile. In a ULIP, your money is compounded, giving in bigger net returns. The returns on ULIPs are also greater than those on Fixed Deposits or similar products. The idea is to keep the money secure over a longer length of time in a ULIP, enabling it to grow exponentially.
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Tax Advantages
Another benefit of ULIP plans is that the premiums paid are tax-deductible up to a limit of 1.5 lakhs under Section 80C. Furthermore, the returns on maturity are tax-free under Section 10(10D) of the Income Tax Act of 1961. This implies that you may take advantage of tax breaks, insurance coverage, and investment growth. Long-term capital gains taxes do not influence the benefits of ULIPs or other alternative investment options. Because of these ULIP plan features, ULIPs are a tax-efficient investment.
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Enhance Coverage Option
Most ULIPs include add-on riders that allow you to increase your insurance coverage. These riders, in addition to your standard life insurance policy, offer you additional protection against unforeseen circumstances such as an accident, permanent incapacity, and so on.
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Top-Up Service
Many insurance companies now provide top-up premiums, allowing you to invest in addition to your regular monthly payment. This ULIP benefit is best used when your ULIP plan is performing well and you have the financial resources to invest more to maximize your returns. A top-up facility is also more convenient, faster, and cost-effective than buying a new plan entirely.
Take Away
ULIPs are a good investment choice for you because of these benefits. A ULIP plan can help you safeguard and financially secure your future and the future of your family.
Also read- How Will You Calculate Capital Gains From ULIPs ?
