Why ULIPs Are For Wise Investors?

The market's natural state is volatility. In comparison to their equivalents, market instruments that invest in equities are more susceptible to market swings. One of the reasons why many people are hesitant to invest in stocks is this. However, there are some smart investing solutions available, such as ULIPs (Unit Linked Insurance Plans), that cater to both risk-takers and risk-averse investors. A ULIP plan allows you to choose more equity-based funds and earn high returns while taking on high risk, which is ideal for risk-takers. ULIPs, on the other hand, allow low-risk investors to invest in debt-based funds and earn high returns while taking a low-risk approach. ULIPs combine the greatest aspects of insurance and investing into a single product. Your premiums are invested in equities, bonds, or balanced funds when you buy a ULIP. Professional fund managers administer ULIPs on your behalf, and they manage market-linked investments. In exchange for services such as fund management, policy administration, and so on, the assurer charges a small ULIP fee.

Why ULIPs Are For Wise Investors?

Below are the reasons why ULIP plans are for wise investors:

1. Flexibility

ULIPs give you a lot of options when it comes to how you wish to invest your money. Aside from the amount you set aside for ULIP insurance, you have a lot of options for how you want to invest your money. Even after you've made an investment, you can always swap between the funds you've selected. For example, investing in equities funds at a time when the markets are booming is a wise financial option. If, after investing, a crisis occurs that causes the market to fall, you can easily switch to a less risky fund, such as debt securities, which offer guaranteed returns. If you notice that your risk profile is shifting, you can be more flexible. A younger professional, for example, can afford to take a riskier investment than someone approaching retirement and with a greater number of financial responsibilities.

2. Availability Of Funds

ULIPs provide investors with liquidity because they allow them to withdraw partial sums in the event of financial hardship. It is always possible to find yourself in a situation where you require funds immediately, and in such scenarios, having liquid funds available from your ULIP is usually a smart idea. However, when the 5-year lock-in period has passed, you can only make partial withdrawals from your ULIP.

3. Benefits Of Taxation

The majority of investors seek out tax advantages when making a purchase. Premiums paid towards ULIP insurance are tax-free up to Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961. Furthermore, Section 10(10D) of the same statute allows for tax exemptions on payouts, regardless of whether they are made to the policyholder or their nominee. The provisions of the Income Tax Act of 1961, as revised from time to time, govern the tax benefits indicated above.

4. Investments With A Long-Term Goal

Your ULIP and investment are perfectly connected with your life objectives. This means you can choose your ULIP based on your life goals, such as saving for your child's education, marriage, or retirement. You can also get a unit-linked insurance policy (ULIP) to help you save for a family holiday. Aligning your ULIP to a life goal will help you save money and ensure that you achieve your objective without sacrificing any of the important aspects.

Conclusion

It is best to start investing in ULIPs when you are young since you will be able to get the greatest rewards from the investment, which will help you reach your life goals. For long-term goals, ULIPs are the best solution. If you understand how ULIPs function, you should start investing right now.

Also read - Mistakes You Should Avoid While Purchasing ULIPs

Are ULIPs A Good Investment Option For Long Term Wealth Creation

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.