As Indians, most of us love it if a product can give us more than one benefit. ULIP is one such insurance product that you should know about. ULIP stands for Unit Linked Insurance Plan.
So what is ULIP?
It is an insurance product wherein you get the ad- vantage of returns as well as coverage on your life. The premium that you pay on ULIP does two things. A portion of your premium goes towards your insurance, which serves as a protection for your life. The remaining portion goes towards investments.
The investments are made in either debt or equity-based products or both. As the policyholder, you control the rights about how your investment portion of the premium is dealt with.
What makes ULIP an attractive investment option?
- Dual Advantage of Insurance and Investment: ULIPs are an ideal blend of the protective benefit of insurance with the wealth-building capabilities of investments. This balanced combination ensures that you not only secure your loved ones' future but also invest in their better future. The returns on investment help them better.
- Flexible fund choices: One of the attractive features of ULIPs is the flexibility they offer in terms of fund choices. Investors can opt for equity, debt, or a balanced mix based on their risk capacity and financial milestones. This flexibility empowers you to tailor your investment in ULIPs to serve your needs better and help you reach financial independence.
- Systematic approach to investments: ULIPs when coupled with disciplined investing through regular premium payments can result in significant wealth accumulation over the long term. This systematic approach instils financial discipline, ensuring that you stay committed to your investment goals.
- Tax Benefits: ULIPs do not just grow your wealth; they also offer attractive tax benefits. Under Section 80C of the Income Tax Act, the premiums paid towards ULIPs are eligible for tax deductions, providing a double advantage of tax savings and wealth creation.
- Transparency and Control: Investors in ULIPs enjoy transparent terms of charges and portfolio performance.
Things to know before buying ULIP:
- Define Financial Goals and Assess Risk Tolerance: Clearly outline short and long-term objectives before deciding how much to invest.
- Understand Charges: Premium Allocation, Policy Administration: Familiarize yourself with various fees affecting returns, and other charges.
- Evaluate Fund Options Based on Risk Profile and Goals: Calculate your risk appetite and then evaluate your options.
- Review past performance and understand the policy better.
- Check Lock-In Period Compatibility with Investment Horizon: Ensure the lock-in period aligns with your investment horizon.
- Read the Policy Document Thoroughly for Terms and Conditions: Gain clarity on terms and conditions by meticulously reviewing the policy document.
- Compare Multiple ULIPs from Different Providers: Conduct a thorough comparison across providers to select a ULIP that best aligns with your financial goals.
- Seek expertise from financial advisors.
- Ensure a Well-Informed Decision Aligning with Financial Objectives: Make decisions based on comprehensive research, ensuring alignment with your financial objectives and risk preferences.
Leverage the benefits of investments and insurance by investing in ULIPs.