Many years ago, a Unit Linked Insurance Plan (ULIP) was known for all the wrong reasons, mainly for high charges. However, the negative reputation of a ULIP Policy has changed over the past few years. Moreover, introduction of Long Term Capital Gains Tax (LTCG) for some other investment options like equity Mutual Fundshas also turned ULIPs in to a more attractive investment option. Today, a ULIP Plan has gained popularity for not only providing good returns but also low costs.
A ULIP Plan is a long-term investment since it has a lock-in period of five years. When you invest in a ULIP plan, the chances of growth of funds is higher, which makes it easier to achieve your life goals. In simple terms, the longer the investment period, the higher the accumulation of funds. Therefore, stay invested in a ULIP policy until the completion of the policy term.
Before purchasing a ULIP Policy, identify your long term goals and plan investment in a ULIP Policy accordingly. In the meantime, let’s take a look at how ULIPs help in long-term wealth creation:
- Dual benefits
A ULIP Policy is a dual benefit product, which offers investment and insurance in a single plan. Moreover, its tax-savings benefits are dual. Under Section 80C of the Income Tax Act, 1961, ULIPs offer a tax deduction up to Rs. 1,50,000 on your taxable income. Moreover, the maturity proceeds received at the end of the lock-in period are also tax-free pertaining to specific conditions. The tax-saving benefits offered by a ULIP Policy is instrumental for fulfilling long-term goals.
This policy allows you to garner substantialULIP returns as compared to many other market-linked investment products. This is because the premium you pay is invested in multiple funds under your plan. Under a ULIP Policy, you can select either equity funds or debt funds based on your risk appetite. For instance, if you have a high-risk appetite, you can invest in equity funds. In case you’re looking for a one-time investment, then see to it that you switch between funds to adapt your investment with the changing market scenarios.
- First-time investment
If you’re investing in ULIPs for the first time, identify your investment goals and choose a plan starting with minimal risk accordingly. Since a ULIP Plan could offer annual returns between 8%-12%, it proves beneficial for all the first-time investors. It will allow you to obtain decent returns and accumulate wealth with timely ULIP renewals over the due course. As a first-time investor, you can be assured by the fact that your ULIP Policy and its underlying fundsare managed by expert fund managers who will help you to obtain maximum benefits.
A ULIP investment allows you to switch between funds during the policy tenure. As a policyholder, you can select between equity funds and debt funds based on your risk appetite and investment goals. All you have to do is choose a policy and change the allocation of funds and stick to those selected funds until the end of the policy. A ULIP Policy gives you the opportunity to explore these funds and enjoy a hassle-free experience while switching between funds.
Many people aim to fulfil their life goals like buying a new house or new car, planning a dream wedding for your children, and so forth. Such life goals require special financial attention since all of them are long-term goals. Therefore, invest in the best ULIP Plan as it is a great wealth-creating tool because of the diversity of ULIP funds.