Things You Need To Know About ULIP Before Investing In It

While inflation continues to grow and living costs rise, it's important to evaluate your finances and ask yourself, "Am I making the best use of my income?"

While most people try to save money for the future, their savings account typically does not add up to much in the end. In the face of multiple conflicting responsibilities, it may also become difficult to save money regularly. As a result, you should consider investing your money to increase its value. The Unit Linked Insurance Plan is a good financial option (ULIP). Let's look at how a ULIP might help you build money for both personal and professional reasons.

Things You Need To Know About ULIP Before Investing In It

Following are the things you need to know about ULIP before investing in it:

1. It Is Possible To Postpone Maturity Dates

Some ULIPs allow investors to postpone their maturity date, which means that the date when the policy matures and the money can be fully withdrawn is postponed. The key advantage of having a policy that allows an investor to extend the maturity date is that it reduces risk if the date falls during a market dip or decline. The investor will receive better profits if the ULIP matures when the markets recover.

2. Family Planning Is Aided By ULIP

One of the most appealing features of a ULIP is that it provides both insurance and death payments. So, if an investor dies unexpectedly, their family can rely on the ULIP to provide financial protection. ULIP plans are also useful for family planning, such as retirement and education for children, as well as any unexpected events.

3. Various Premium Payment Methods

ULIPs are known for their flexibility, which extends to the payment structure as well. When it comes to paying premiums, investors have three options: a single premium plan in which the entire investment is paid in one lump sum, a regular premium plan in which a fixed amount is deposited for the duration of the ULIP, and a limited premium plan in which the amount is paid for a specific number of years.

4. A ULIP Has A High Return Potential

One of the most appealing aspects of ULIPs is that the return on investment can be extremely high—even in the double digits. When premiums are wisely invested in a variety of assets and tax-saving funds, the investor profits greatly. A ULIP can be a tax-wise and rewarding investment.

5. Discipline Is Maintained During The Lock-In Phase

A five-year lock-in period on a ULIP means that the investor must continue to put money into the policy during that period. Investors are encouraged to save continuously and grow their savings during the lock-in period. Investors can withdraw a portion of their money or even cancel the ULIP when the lock-in period ends.

6. ULIPs Are Excellent Long-Term Investments

ULIP insurance is a popular long-term investment, despite lock-in periods and transaction fees. To be active, they require frequent payments, teaching investors to be more disciplined while also building their wealth. The lock-in period encourages investors to retain their money in the market and profit from market changes. Future Generali Future Opportunity Fund is an example of a ULIP that allows participants to mix and match assets to create a varied portfolio.

7. Under Section 80C, ULIP Plans Are Tax-Deductible

Under Section 80C of the Income Tax Act of 1961, a ULIP  is a tax-deductible investment. This means that premiums up to Rs 1 lakh are tax-free, making ULIPs an appealing investment for first-time investors. The ultimate payment is tax-deductible under Section 10 (10D) of the Income Tax Act 1961, even after the policy matures.

Conclusion

A ULIP has long been the preferred investment vehicle for young Indians in their twenties and thirties. They are not only simple to use and comprehend, but they also offer a variety of risk and return alternatives. Investors claim that a ULIP policy benefits them in the long run by teaching them how to save and be more conscious of their spending habits. The strategy delivers consistent profits, which is particularly beneficial to young individuals just starting.

Also read - ULIP Is A Smart Investment Choice

ULIP V/S Endowment Plans

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.