Top 10 Benefits of ULIPs
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ULIPs are market linked plans that offer you market linked returns along with valuable financial protection for your family.
A unit-linked insurance plan (ULIP) is a type of investment that combines life insurance with market-linked wealth building. Furthermore, because these plans can invest in both the equity and debt markets, they have the potential to outperform conventional tax-saving programmes.
Top 10 Benefits of ULIPs
Following are the top 10 benefits you receive from investing in a ULIP:
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Maturity Benefits
Under this policy, the investor will receive the fund value even if they endure the maturity term. However, the entire risk coverage ends after the policy term expires.
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Loyalty Additions
Loyalty Additions as a percentage of average Fund Value can be obtained by staying invested during the Policy Term. On the first day of each month, Loyalty Additions will be added to the Fund Value. However, it is important for the investor to be updated with all the premiums and the policy to avail this benefit.
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Availability of Partial Withdrawal
ULIPs allow the investor to withdraw money from the account to cover any unexpected expenses. The payments can be withdrawn in lump sums or in parts.
In some cases, however, the policy requires the life assured to be at least 18 years of age to allow withdrawals.
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Market-Linked Returns
ULIPs are a favourable option for you if your intention is wealth generation. They allow the small investments to be made on a regular basis. Under these plans, equity allocation helps in earning market related return while debt allocation provides stability to the portfolio. The investments end up being compounded once a year, resulting in excellent profits.
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Cost Effectiveness
ULIPs are a great insurance option as they allow the flexibility of premiums and the policyholder to get benefits of a life cover at lower costs. They also have a low expense ratio, generating better return for the portfolio
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Tax Benefits
Under the terms of the Income Tax Act, you are entitled to tax benefits on the premium(s) paid under sections 80C and 10(10D).
These plans allow the investors to avail benefits on returns based on prevailing market conditions.
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Long Term Investment
ULIPs are a great pick among investors for long term investment. The net returns in these plans remain high as compared to the counterparts. These plans, under favourable conditions, function well and avail good returns over a period of time.
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Option To Switch Funds
Since the premiums paid are directed towards investment in funds, ULIPs also give you the freedom to transition from one fund to another, such as from equities to debt and vice versa, depending on market conditions or your investing objectives. As a result, this option allows you to adjust the ratio of your invested money without incurring any additional costs.
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Transparency
In comparison to other insurance plans, ULIPs are considered easy and transparent. ULIPs will assist you in becoming acquainted with your investment funds and even help you allocate your funds during the plan. Since ULIPs work in close connection to the market and are more vulnerable to risk, these plans ensure transparency in front of the policyholder.
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Loan Benefits
ULIPs make the process of getting a loan much easier. They also aid the process of taking a loan by reducing the amount of paperwork necessary.This is a beneficial feature when you are embarking on significant life endeavours that require substantial financial backing.
Endnotes
ULIPs can be used as multipurpose plans due to the variety of benefits they offer. As the above article suggests, these plans are popular among the investors and function in association with the market to avail overall good returns.
Also read
Are ULIPs Better Than Fixed Deposits?
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.
