Global Literacy Day is celebrated all over the world today. And while it was set up to reduce illiteracy, there also should be something that should be done to enable people to become financially literate. If you are one of those who wants to know about what should be done to achieve financial stability, you might want to know about ULIPs.
There are many advantages in investing in a ULIP over other kinds of policies. The benefits that a ULIP offers over its other counterparts are what make it increasingly popular among people.
A ULIP investment plan is a kind of investment product which not only provides tax benefits but also allows you to accumulate wealth in the long run. If you are looking to buy a life insurance policy, then the following advantages of investing in a ULIP will help you make a better-informed decision:
Various Tax Benefits?
You can enjoy tax benefits by investing in a Unit Linked Insurance Plan, which will allow you to access tax rebates at every stage of your investment. When you buy a ULIP, you’re able to claim a tax deduction for the premium you’ve paid. In contrast to mutual funds, gains from ULIPs are tax-free once they’ve completed their lock-in period. Even the returns gained through the policy such as assured sum and maturity proceeds are free from any kind of taxation as per Section 80C and Section 10(10D) of the Income Tax Act of India.
1. Multiple Customization Options
Unit Linked Insurance plans allow you to invest your capital in various assets like bonds, debt, and hybrid funds. By being able to switch between various fund options based on their risk profile and returns provided, Unit Linked Insurance plans make your investments highly customized and effective. Additionally, you can orient your investments to adjust your risk exposure. It’s a good idea to keep track of new trends in the market to make the most returns out of your ULIP policy. You can easily switch between multiple fund options without paying any additional charges at the comfort of your home through online availability.
2. Liquidity Of Funds
All ULIPs have a lock-in period of three to five years, during which you cannot get your money back. If you no longer want to invest in a Unit Linked Insurance Plan, you may be able to get your money back without penalties after the lock-in period. In such situations, your funds get transferred into a discontinuance fund. Moreover, legally you are bound to get the returns on that investment. However, you cannot access that money for a certain period during the lock-in period. This is a good financial instrument as the lock-in period is short, and it’s quick to withdraw money.
3. Transparency At Every Step
When you purchase a ULIP policy, the total amount that you pay for is not just the premium that you pay. You also have to pay various other charges such as fund management charges and allocations charges. These charges are based on the investment decisions that you make throughout the tenure of your policy.
The administration charge is an expense you must pay in order to maintain your policy. The longer the insurance, the more it will cost you in premiums and charges. The surrender charge will be charged if you end your policy before it reaches maturity age. The first few years of your investment may be a bit more expensive than what you’re used to.
However, the cost involved in the charges of ULIPs is significantly lower than other types of insurance plans. ULIPs offer high returns in the long run, and you won’t have to worry about extra charges. Under the new rules from IRDAI (Insurance Regulatory and Development Authority of India), ULIPs’ charges will be capped at 3 per cent.
4. Availability of Top-Ups
If you want to invest more money, ULIPs let you add top-ups to your existing policy. This lets you increase your investment amount when your chosen funds are performing well, maximizing your returns on investment and allowing you to make the most out of your policy while maintaining a stable monthly budget.
5. Two Benefits in One Plan
Unit Linked Insurance Plans (ULIPs) provide you with insurance and investment benefits. If you die during the policy tenure, your family receives the sum assured and other returns on investment. Also, if you survive till the end of the policy tenure, you will still be able to enjoy the returns gained on your investment through investments in debts and equity markets. A portion of your monthly payment on the ULIP premiums is used to make financial investments in debt and equity, which can generate a sufficient corpus to fulfil your dreams.
6. Rich in Features
Most people consider investing in ULIPs to be more favourable than investing in any other traditional investment option. That’s because these plans allow you to invest part of your money into different kinds of funds, like bonds or stocks, and also offer tax benefits in both premiums paid and returns gained. Additionally, the premiums are much cheaper and you get more benefits in the future. It also has a high coverage that keeps you safe from any mishaps.
In conclusion, if you are a first-time investor and have been thinking of investing in ULIPs, it is high time for you. To give your children a sound future, ULIPs will help you grow your money while reducing the risk of loss. You can get started with these investments on This Global Literacy Day if you believe that the benefits associated with it are worthy enough for you.