Know Why You Should Choose ULIPs For A Safe Future

You must pay a periodic fee to participate in a ULIP and benefit from all of the benefits that this investment option has to offer. This premium is used to provide you with life insurance as well as market-linked returns, as a portion of it is invested in the markets in the assets of your choice.

ULIPs, unlike most other investments, are adaptable and may be tailored to your specific needs. In reality, ULIPs are becoming increasingly popular in India, with a growing number of young Indian investors choosing this unique investment instrument. According to a survey, nearly 90% of respondents in the age category of 23-25 years favored ULIPs for two main reasons: insurance protection and long-term wealth creation.

Know Why You Should Choose ULIPs For A Safe Future

Let's look at some of the reasons why ULIPs are regarded as one of the best investment options for achieving long-term financial objectives:

1. Coverage For Life Insurance

One of the basic tenets of a secure future is to have a life insurance policy in place to protect your family's financial security. Financial experts are often pushing people to acquire insurance to protect themselves from life's nasty surprises. ULIPs provide life insurance as well as an investing component.

2. Building Wealth Through Investment

After you've taken care of your security, you should concentrate on wealth-building investments. ULIPs take care of your investment demands and wealth accumulation by investing in the market through various funds with varying degrees of risk. ULIPs generally invest in a variety of asset classes, including stocks, balanced, and debt funds. While equities provide strong returns on investment, balanced and debt funds protect the corpus in the event of a market downturn.

3. Investment Flexibility To Create And Protect A Corpus

Making investments that outperform inflation is critical for a secure financial future. With time, inflation erodes the value of wealth. At the same time, you must be cautious to avoid losing your hard-earned money as a result of market fluctuations. ULIPs provide you with crucial flexibility in your investment to ensure that you not only beat inflation but also preserve your capital.

You can increase your stock exposure in the beginning because this asset class offers the best likelihood of inflation-adjusted returns. When you get closer to your objectives, though, you can convert from equities to balanced and debt funds. You can also replace a losing fund with a more profitable one if it is underperforming.

4. Partially Withdrawable Funds

The 5-year lock-in term encourages investors to stay invested for a long time, allowing their money to grow. It also instills a disciplined investment mindset. However, there will be times when you will need to withdraw funds to meet your demands. You can take money out of your ULIP instead of applying for loans and paying EMIs. It's important to note that you can use this option after the statutory 5-year lock-in period has ended.

According to current income tax rules, the premiums you pay for your ULIP are eligible for tax deductions under section 80C of the Income Tax Act, 1961, and on maturity amounts under section 10(10D).

5. Tax Exemptions

When you invest in a ULIP, you can take advantage of certain tax breaks provided by the Income Tax Act of 1961. In fact, ULIPs provide you with EEE tax treatment, which allows you to take advantage of three separate exemptions. To begin, under section 80C of the Income Tax Act, you can deduct up to Rs. 1,50,000 of the premium contributions you make to a ULIP from your total taxable income in each financial year.

Furthermore, under Section 10D of the Income Tax Act, the maturity advantages that you receive at the end of your investment term are fully tax-free.

Conclusion

ULIPs are fantastic investment options if you want to meet your long-term financial goals because they come with built-in life insurance. This component ensures that your family's financial condition is stable even if you die away before the investment period ends. If this happens, the plan shields your family from financial hardship and grief by providing a "death benefit" to your beneficiaries. This death benefit is essentially a lump sum of money that your family can utilize to cover their financial commitments while you are gone.

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.