In today’s competitive world, there are plenty of saving and investment choices that decide your future financial wellbeing as well as that of your loved ones.
Nowadays there are several options available to help you save for future such as ULIPs and government-sponsored savings schemes (e.g. EPF, NPS.) Take NPS, for example. To create an NPS login online, you can go to NSDL’s website and register yourself. When it comes to ULIPs, however, there is more to the story than just capital appreciation – you can also protect your family against life’s uncertainties with an in-build insurance cover.
ULIPs, also known as Unit Linked Insurance Plans,is a viable investment option that has become popular over the years due to its mutual benefit of insurance coverage and investment benefit through market-linked returns. Additionally, you also become eligible for tax exemption u/s 80C and 10D of the Income Tax Act when you invest in a ULIP plan. Moreover, ULIPs have a mandatory lock-in period of 5 years. Therefore, by investing in a ULIP plan in India, you can build a long-term corpus.
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How do ULIP Plans work?
When you decide to invest in a ULIP plan, your payable premium will be split two ways – insurance and investment in market-linked assets. One part will be used to fund your life insurance cover that will protect your family against financial turmoil in case of untimely death. At the same time, the remaining portion of your premium is invested in an asset fund of your choice. It can be debt-based, equity-based, or a balance of both. As a ULIP plan investor, you can choose the composition of these funds as per your risk-taking ability. You can also switch between funds midway if the fund fails to perform well in the market.
Here are some of the most common types of ULIP plans:
1. Savings Plan
ULIP is a high starting point for a first-time investor to invest in a market-linked product. With the help of this plan, you can create a corpus of funds over a period that can be used for a wide range of purposes. Thanks to its mandatory lock-in period of 5 years, you not only inculcate a habit of saving but also allow your savings to grow organically through the power of compounding. What you get at the time of maturity is a handsome amount that can be used to fulfil your future goals, such as buying a house or a car.
2. Child Plans
As a parent, the most important financial goal for you is to save for your child’s future. Saving for life goals is something that needs to be done with care and planning. When the question is your child’s future, then there is no such thing as too soon. You can start investing within 60-90 days of their birth so that you can accumulate a large sum of wealth by the time your child comes of age.
The best financial instrument to invest in your child’s future is a ULIP plan. These plans make sure that your child’s future goals are secure, even if you are no longer around. In case of your unfortunate passing, your child will receive a lumpsum amount along with monthly income benefits to help them stay focused on their career path, without worrying about finances. The most significant advantage of ULIP-based child plans is a waiver of premium rider. In the event of your untimely death, all the future premiums will be funded by the insurance company, thereby keeping your child secure.
3. Retirement Plans
You work all your life to make your future secure, first as a student and then as a professional. You never give your young self a carefree moment. However, by investing in the right ULIP plan in India, you can ensure that your retirement is tension free.
Apart from working hard towards a secure future life, it would help if you also worked smart. Support your goals with proper financial planning to remain independent even after retirement.
Post-retirement, your income will stop but your bills will not. They have the potential to increase because of your healthcare expenses. This is why you must build a pension fund with the help of a ULIP plan that will give you a combined benefit of life insurance as well as mutual funds investment.
Benefits of ULIP
ULIPs are called market-linked insurance products because they help you plan long term savings and protection. Here are the top features of ULIPs that make it a worthy investment for the long run:
(A) Flexible investment options
ULIPs offer a wide range of investment options based on your risk tolerance. You can choose the appropriate funds as per your preference. The policy also allows you to switch between funds without any additional charge. Additionally, you are also free to choose the sum assured or the premium based on your requirements.
(B) Transparency of funds
The ULIP plan charges along with investment value, tenure, and expected rate of return is shared before you buy the policy. At the same time, annual and quarterly statement of your investment portfolio along with daily Net Asset Value reporting will ensure that you are always aware of its status.
(C) Availability of liquid funds
During emergencies, ULIP plan allows you to make a partial withdrawal if you want funds before the maturity period of 5-years.
(D) Healthy saving habit
By staying invested in ULIP, you develop a habit of saving, which goes a long way in helping you build a corpus for your future requirements.
(E) Tax benefits
Avail tax benefits u/s 80C on the premium paid towards ULIP.
(F) Risk spread
A fund manager is allocated to your ULIP plan, which keeps track of your investments and maintains the risk.
Investment options such as NPS, EPF, and ULIPs are structured in such a way that they help you earn guaranteed returns if you do it the right direction. Just be sure to research and read extensively about the investment option before committing to it for the long term.
(Disclaimer: The article is sponsored, and hence promotes some commercial links.)