Handling market correction – Switch over from mutual funds to ULIPs now

The never-ending debate between the Unit Linked Insurance Plan (ULIP) and Mutual Fund (MF) takes new turns and twists every day. With the increasing need for life insurance plans due to the higher life expectancy, the need for these two products is growing rapidly. Due to the urgent need of these products, the investor is often confused about which product to invest in.

On the other hand, due to the new reforms and advent by Long Term Capital Gains Tax (LTCG), ULIPs have topped the priority list of all the investors. This is because of ULIP’s benefits that make the product stand out in the market as compared to mutual funds. In order to enjoy the advantages of the new-age ULIPs, it is important to switch from your current policy to the ULIPs. If you’re interested in doing so, then keep reading to find out the appealing reasons for the switch:

Reasons why you should immediately shift to ULIPs:

  1. MFs offer only the scope for investment

Unlike mutual funds, ULIPs offer its customers with dual benefits of investment and insurance under a single plan. With that, a ULIP Plan ensures the protection of your family needs as well the investor’s participation in the equity markets. Therefore, invest in ULIPs in order to enjoy the maximum benefits from this type of life insurance policy.

2. MFs generate poor returns

The main reason why investors have lost their faith in mutual funds is because of poor returns on investment. However, returns won’t be an issue once you start investing in ULIPs. This is because investment in a ULIP policy promises higher returns which are beneficial to the investors. Since ULIPs have already outperformed mutual funds, it’s advisable to invest in ULIPs for higher returns.

3. MFs do not provide tax benefits

Under ULIPs, the premium paid towards the policy is directly eligible for tax deductions under section 80C of the Income Tax Act, 1961. However, this benefit is not applicable when you opt for SIP in equity funds. Moreover, investment in ULIPs offers a lock-in period of 5 years which ensures the tax saving benefits for a longer duration of time whereas ELSS have a lock-in period of 3 years.

4. MFs have a higher cost

If you compare ULIPs from a decade ago to what they are today, a ULIP Plan has decreased down their costs. Mutual funds offer its customers with very close competitive prices. However, this is only the case depending upon the type of policy you’re investing in. Therefore, invest in an online ULIP Policy as it may not come with the payment of policy administration and fund allocation charges.

5. MFs do not allow switching options

Unlike mutual funds, ULIPs provides the investors with multiple funds options which allow switching of funds with ease. The investor can select from equity funds, debt funds, and balanced funds based on their risk appetite. If you have a high-risk bearing capacity, then invest in equity funds. While debts funds promise low risk, the balanced funds guarantee moderate risk-bearing capacity.

Before thinking twice about ‘What is ULIP?’, and ‘Why should I invest in one?’ know that your investment in ULIPs is a better investment solution as compared to other products. In simpler words, ULIP Insurance ensures the protection and growth benefits altogether without opting for two separate plans. It not only guarantees flexibility but also affordability which makes the choice of investment pretty obvious.

Now that you have a few of the most important reasons why you should switch to ULIPs when are purchasing the policy? Make the right choice that fulfils your needs of investment and insurance, at the same time. Take the right expert advice in order to complete all the ULIP formalities to get the plan started immediately.

Author: Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles of partners on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to editor.webposts@gmail.com.