Whether you are a new investor in the market or are the last-minute tax planner, there is one product, which will fit all your needs. Out of all the products available in the market, Unit-Linked Insurance Plan (ULIP) is one product that offers a number of benefits and is a dual performer. The plan offers an insurance cover and an investment benefit. This means you do not have to buy a separate insurance policy and can enjoy the same benefit in a single investment plan. ULIPs are highly preferred by investors with long-term goals. They are also the first choice for last minute tax planners. In ULIPs, the returns from the investment are not taxed.

Benefits of investing in ULIP

  1. High returns

A ULIP policy has the potential to generate high returns as compared to any other insurance product. This is because of the equity advantage that the plan has. Your premium amount is invested in different asset classes across various funds. Tax-saving funds have generated double-digit returns in the past but if you are making a one-time investment only for the purpose of tax saving, you will have to look for a new fund every year. In the case of ULIPs, the renewals take care of the tax-saving aspect. The returns of the ULIP plan l also depend on the performance of the market during the investment tenure.

  1. Dual advantage

The biggest advantage of a ULIP is the dual advantage in the form of investment and insurance. If you purchase a term insurance plan, there will not be any returns generated on the same. However, with a ULIP, there will be an insurance cover and returns in the long term. A ULIP offers minimum sum assured which is equal to 10 times the annual premium for all the investors who are below 45.

  1. Flexibility

ULIP offers flexibility like no other investment product. In ULIP, you have an option to switch between funds over the term of the investment. This means you can choose between equity, debt, income, balanced, or growth funds based on your goals and risk appetite. You can make free switches between the funds. You also will not have to keep a record of the companies that your fund invests in. All you need to do is choose a policy and then change the allocation over the term.

  1. Lock-in period

One major benefit of investing in ULIP is the lock-in period. You cannot exit the fund during the lock-in period but you are allowed to make partial withdrawals from the same. There is a lock-in period of five years and it will help bring financial discipline in your life. You will be able to achieve your long-term financial goals with consistent investment in ULIP and being active in the scheme for a longer duration.

  1. Life cover

As mentioned earlier, ULIP is a dual product. In addition to helping you achieve your financial goals, ULIP will also help you fulfill the need for protection. It offers a life cover on your investment, which also works as financial security in case of your untimely death. You will not be required to invest in a separate life insurance policy if you have invested in ULIP.

  1. Tax benefit

The biggest advantage of investing in ULIP is the tax benefit. You can claim a deduction for the premium you paid on the investment under section 80C. This amount has a limit of INR 1.5 lakh. In addition, you are also not liable for tax when you receive the maturity amount. When you compare ULIPs to any other product, you will notice that it has the best tax benefits for you.

  1. Achieve your financial goals

Every individual has certain financial goals to achieve and ULIP is an investment product that will help you with the same. Whether you are investing for short-term goals or for long-term goals, ULIP will help you turn them into a reality. Estimate the goals and determine your investment tenure accordingly. The most important thing is to remain invested for the specific tenure in order to maximize your returns.

ULIPs are by far the most flexible product available in the market. They can help you achieve your financial goals while being covered with a life insurance policy. If you invest into a term insurance plan, you might not be able to grow the wealth or generate higher returns. However, with a ULIP, it is possible to have an insurance cover as well as a diversified investment portfolio. Consider your risk appetite and the purpose of investment before you choose the best ULIP plan. You need to maintain financial discipline and remain invested in the plan to generate higher returns. Do not withdraw funds from the plan at the first opportunity. You get to choose from an investment mix and you need to make a wise decision. Keeping your risk appetite in mind, you can choose the best ULIP fund out of growth, debt, equity, and balanced funds. Whether you are investing for the purpose of tax benefits or for life insurance, nothing can beat the benefits of ULIP. The financial product is a must-have in your diversified investment portfolio.



By Chakraborty

Dr Chakrabarty is the Chief Innovation Officer of IntuiComp TeraScience. Earlier she was Assistant Professor of Delhi University, a QS ranked university in India. Before that she has held research positions in IIT Mumbai, IIT Chennai and IISc Bangalore. She holds 2 patents and over 20 research publications in her name which are highly cited. Her area of research is in smart technologies, integrated devices and communications. She also has a penchant for blogging and is an editor of Business Fundas.