Looking for ways to ensure financial stability for your family besides creating wealth to fulfil your goals? If the answer is yes, buy a ULIP or Unit Linked Insurance Plan online or offline. These plans offer investors the dual advantage of insurance cover as well as wealth creation. The premium paid by the policyholder is divided into two, with one portion kept aside for the insurance purpose, while the other being invested in a variety of financial instruments like debt, equity, or a combination of both. Offered by insurance companies, ULIP policies allow their investors to achieve a variety of goals like buying a home or a car or building a corpus for their child’s education or retirement. Let us find out more about what is a ULIP policy and what kind of benefits come with it.
Features and Benefits of ULIP
ULIP policies are highly suitable for investors who are looking to create wealth while providing financial security for their loved ones. An attractive feature of this insurance policy is that it allows investors to choose the assets in which to invest according to their risk profile. Investors also have the option to make partial withdrawals (after the end of the lock-in period) to fund any kind of emergencies. Another rewarding feature of these insurance schemes is the tax benefits on the premiums and the maturity amount.
Investors can choose the assured amount with the help of a ULIP calculator. They also have the option of increasing the sum assured at a later stage by adding a top-up premium, which again, is eligible for income tax benefits.
Some advantages of buying a ULIP plan online or offline are:
- Insurance Coverage Plus Wealth Creation- The insurance protection available under a ULIP ensures that a policyholder’s family does not have to suffer financially in case of a mishap. The plan also helps a policyholder save diligently and pay the premiums that are used to build a corpus that can be used for the fulfilment of long-term goals, like the purchase of a house or a vehicle or funding the education cost of children. A ULIP offers investors a long-term investment opportunity that not only helps in covering life uncertainties, but also uses the investment route to build a kitty of funds.
- Funds Managed by Professional Managers– By choosing to invest in a ULIP, investors get a chance to earn good returns on their investments. And since these funds are managed by professionals, investors do not have to carry out extensive research or study the markets before making their investment decisions.
- Investment Options- ULIP comes with several investment options, ranging from debt, equity, and a combination of two. This allows investors to choose a plan according to their risk appetite and financial goals. Policyholders also have the option of switching from one fund to another, based on a change in their goals or risk-bearing capacity. And this switching does not entail any additional cost.
- Additional Protection for Accident cover or Critical Illness– Most insurance companies offer policyholders a chance to add additional features like accident cover or disability coverage or critical illness cover to their ULIP plan. Such features allow investors to have maximum coverage against life’s uncertainties while earning some good returns on their investments.
- Option to Enhance Coverage and Make Partial Withdrawals– ULIP plans allow investors to enhance their coverage during the policy life itself and pay additional top-up premiums. The investors also have the option to make partial withdrawals from their accumulated fund value in case of emergencies, but this is possible only after the lock-in period of five years ends.
- Tax Benefits– A major feature of ULIPs is that the premiums made towards them are eligible for tax exemption under Section 80C. And this benefit is available on top-up premiums too. Also, the maturity proceeds are exempt from taxes under section 10D. Again, ULIP is one category of financial instrument that does not attract long-term capital gains tax.
ULIPs are highly popular because of the various advantages offered by them. But investors need to be aware that they have to pay certain extra charges relating to fund management, premature surrender of their policy, or partial withdrawal charges, and in some cases, switching charges. The IRDAI has, however, capped total ULIP annualised charges at 2.25% for the first ten years of holding a policy.
To conclude, investors can choose a ULIP plan to achieve the twin objectives of creating wealth and securing the financial future of their loved ones. Factors to consider before buying a ULIP plan online include choosing an insurance company with a good settlement record and choosing an investment plan that matches the long-term goals.