A Unit-Linked Investment Plan (ULIP) is a type of insurance plan that has two components. One is the insurance component that comes with life cover and death benefits. The other is the market component that gives you the benefits of investing to reach your long-term goals. Now, as there is a market component, ULIPs always have a bit of risk involved. But when you consider the following benefits, you will understand that the advantages of getting this policy far outweigh the risks.
#1 The best of both worlds
An ULIP is the best investment plan if you want the best of both worlds – insurance and investment. Through this plan, you can earn a good return on your investment at maturity. On the other hand, your family’s needs are taken care of by the insurance component. It is a win-win situation if you really consider it.
#2 Major tax exemptions
Another lucrative benefit of ULIPs is that they come with hefty tax benefits under the Income Tax Act. So, you get three-fold tax exemptions under these policies –
- Under Section 80C, you can claim up to INR 1.5 lakh in tax exemptions each year
- Under Section 10(10D), the amount received by the beneficiary upon the policyholder’s demise gets tax exemptions
- Under Section 10D, the maturity benefits of the ULIPs get tax exemptions
#3 Withdrawals during lock-in periods
Most of the insurance and even some of the investment options do not allow you to make withdrawals during the lock-in period. But that’s not the case with ULIPs! You can make withdrawals up to a particular limit even during the lock-in period. Of course, some deductions and fees are going to be levied for this, but withdrawals will be allowed.
#4 The option to increase investment
Maybe you got a promotion recently, or your present fund has been doing exceptionally well. Whatever the reason, you are allowed to increase your investment amount to get greater returns down the line. ULIP funds under any insurance company come with this feature.
#5 Long-term growth opportunities
ULIPs are meant for long-term financial planning. Your money must remain in the market for a longer duration to get substantial returns. If you have any long-term goals, such as higher education for your kids, then it is a good idea to open a ULIP to save up for that aim.
#6 A customizable choice
The fact that you can change and increase your investment has already been mentioned before. Keep in mind that ULIPs also allow you to alter the portfolio allocation and strategy. If you feel that it will better suit your financial goals, then you can readjust fund allocations to reduce risks. However, make sure you think this through and discuss it with your financial advisor before proceeding with such changes to your plan.
So, do you want the best of both worlds – insurance and investment? Choose a ULIP fund right away and start effectively saving for the future of yourself and your family.