Reasons Why ULIPs Are Secured Long Run Investment

Unit Linked Insurance Policies or ULIPs are insurance plans that provide you a chance of wealth creation as well as security of a life cover. In short, ULIPs offer two components, i.e. investment and insurance to the insured. In these plans, a part of your premium is dedicated for the life cover and the rest goes to a common pool of money known as a fund, which invests in equity, death, or both. The returns on investment depend on the performance of the fund that you have chosen.      

If you have understood what are ULIPs, but are looking for reasons that why are they a secured long-run investment, then refer to the points below: 

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  Good Option For First Time Investors

ULIPs solve the purpose of investment and insurance both under a single policy, and hence it is a good choice for first time investors who are slowly drifting from traditional investment schemes. 

• Potentially Better Returns

ULIPs offer a better rate of interest as compared to other insurance policies considering their equity advantage. The premium paid for ULIPs is put in different funds in different asset classes. They tend to give double digit returns and also allow one to avail tax benefits. But, the maturity is based on the performance of the equity market during the tenure.  

• Lock-in Period 

ULIPs come with a lock-in period of 5 years which help the investors maintain investment discipline. The lock-in period is calculated from the date of policy issuance and the premium can be paid on a monthly or annual basis. 

• Dual Benefits

ULIPs offer tax benefits to the investor for up to Rs. 1.5 Lakh under Section 80C of the Income Tax Act. This indicates that ULIP is a great option for long-term investment. It has been seen that a ULIP has offered a sum assured of at least 10 times of the annual premium to investors aged less than 45 years. Also, the IRDAI guidelines have made ULIPs very investor-friendly as compared to earlier times. Also, it has reduced other costs like premium allocation charges, surrender charges, etc. 

• Flexibility 

ULIPs allow flexibility to the investor to switch between funds during the policy tenure. You can opt between equity, balanced, growth, and income funds according to your risk taking ability and goals. 

Conclusion

A ULIP can help you boost wealth and meet long term financial goals with diversification of funds. Hence, it is an ideal choice for someone who wants a 5-year investment and wants to enjoy equity advantage.   

Also read - How ULIP Lock-In Period Helps You Invest For Long-Term Goals? 

3 Best Tips to Invest in ULIP with Lower Cost

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.