Ulip Insurance Is The Safest Route To Get Into Equity Funds. Here’s How!
A ULIP policy is a unique financial investment product that provides you with both life cover and secure investment opportunities in market-linked investment channels like mutual funds, stocks, bonds, and a lot more.
These plans are ideal for people looking to make long-term investments in exchange for good returns. As of now, there are over 100 different ULIP insurance plans available with more than 500 fund options to choose from.
Investing in ULIP is considered the safest way to put your money into equity funds. That’s because it not only allows you to switch between funds anytime but is also less complex than the stock market with little or no learning curve.
What Are Equity Funds?
Investing your money directly into the share market can be very risky, as it contains a significant learning curve and you have to rely on the performance of only a limited number of companies. On the other hand, by investing your money in equity through any investment policy like ULIP insurance, you can invest in a variety of shares for different companies.
With equity funds, you can align your investments in several regions, countries, investment styles, and industries to spread the risk and diversify your portfolio. There are several different types of Equity Funds available in the market with varying risks associated.
Why is ULIP the Safest Long-Term Investment?
If you have never invested your capital before, it’s pretty normal to worry. Here’s a list of reasons why ULIP policies are the safest option to invest in equity funds and enjoy great returns over the long term:
- Lock-in Period
As ULIP plans involve a lock-in period of five years, it encourages investors to maintain discipline and wait for the funds to get stable. With only a single ULIP insurance, you can enjoy several benefits over the long run. For instance, you only have to purchase it once and you’ll be able to enjoy tax benefits every year until the end of your policy tenure.
2. First Time Investors
It can be observed that investors are gradually transitioning from traditional investment opportunities to market-linked investment options such as equity funds. With such a drastic change in the process, it only makes it easier for first-time investors to choose ULIP as their way to invest in equity funds. It offers both life insurance and investment opportunities in a single policy.
3. Greater Returns
As compared to other insurance plans available, ULIP policies can offer better returns as there are market-linked products like equity funds involved. The premium you’re required to pay towards the benefits of the ULIP is used to invest in funds of different asset classes. Some of these even have a track record of providing double-digit returns along with tax-saving benefits.
Although the maturity amount depends on the performance of the equity market during the tenure of your policy, it is the only investment option that allows you to beat the rate of inflation without taking much risk in your portfolio. The best thing about ULIP plans is that the maturity amount is completely free from any kind of taxes.
4. High Flexibility
ULIP plans are also known for their flexibility as they allow you to switch between the various funds available. It allows you to choose from assets like equity, balanced, growth, and income funds as per your risk-bearing capacity and financial goals. There are a limited number of free switches that you can use in a financial year.
As compared to share market investing, ULIPs don’t require you to constantly track a company’s progress that you’ve invested in. You just need to choose ULIP insurance, change the funds based on performance during the tenure, and keep it active till maturity to gain very promising long-term benefits with great flexibility.
5. Combined Benefits
As per the prevailing laws of Section 80C of the Income Tax Act of India, ULIPs are eligible for tax exemption of up to Rs. 1.5 Lakhs, which makes it a great tax-saving instrument for the long term. It has historically offered a 10x minimum sum assured of the annual premium to the investors. Moreover, they’re now much more promising as several costs are reduced such as premium allocation charges, administration charges, surrender charges, fund management charges.
Is ULIP A Good Investment Option for You?
ULIP policies are not intended to be a last-minute tax-saving tool that you purchase in a hurry. It is more of an investment opportunity that helps you achieve long-term goals like childbirth or marriage. Consistent investments in ULIP plans help you meet your financial goals by boosting your income to a great extent.
While investing in a ULIP, you have to keep several factors in mind like lock-in period, rate of return, and maturity period. The majority of debt-related investment options like endowment plans have a maturity period of only 10-20 years. On the other hand, government-related schemes such as National Savings Certificate or Public Provident Fund have a lock-in period of 5 and 15 years.
With that said, ULIP plans excel in terms of equity-linked investments as compared to other life insurance plans available in the market. It further adds a security factor to your life by covering you under life insurance as well. This means even your family members are safe in the event of your unfortunate death.
The Takeaway
With the help of the several features provided by ULIP insurance and a clear understanding of what is ULIP, you can easily boost your wealth and attain financial security to meet all your goals in life. It is an ideal investment option for people looking to put their money on equity-linked products. ULIPs not only help you diversify your funds but also provide you with adequate life coverage. If you want to invest long-term, then there’s nothing better than ULIP plans for maximum benefits.
