Whenever you plan to start investing your money, it is essential to explore a number of investment options and make an appropriate choice. These investment options offer various benefits, out of which you can choose the option that aligns best with your goals.
Nonetheless, due to the growing uncertainties, it is important to have life cover so that your loved ones can stay financially secure even in your absence. To have a comprehensive life cover along with other investment benefits, you can choose to buy a ULIP policy and evaluate the cost using a ULIP calculator.
In simple words, ULIP is a multi-faceted life insurance product that provides life cover along with the benefit of generating passive income by investing a part of your premium amount in market-linked securities.
Just knowing what is ULIP might not be enough; therefore, find below a few noteworthy benefits of investing in a ULIP Plan:
- Dual Benefits
As mentioned above, a ULIP plan is a financial tool that provides dual benefit in a single package. It provides the benefit of life cover while providing other investment benefits. It is advisable to divide the amount between the life cover and investment in accordance with your goals and priorities. You can make the required calculations using a ULIP calculator online. This will save your time, effort and help in better finance management.
- Triple E-E-E Benefit
Under a ULIP Plan, the policyholder receives triple E-E-E benefit (exempt-exempt-exempt) at all three stages, i.e. investment, returns and withdrawal. You can evaluate the amount using a ULIP calculator online.
- Under Section 80C of Income Tax ACT, 1961, a policyholder can claim a tax rebate on premium payment up to Rs 150000 per annum.
- Other tax benefits on withdrawal and returns are covered under Section 10D of the Income Tax Act, 1961.
- Top-up Advantage
Under this, you can opt to invest more money during the tenure and add on to the sum assured of your existing policy. It is advisable to add the amount after observing your funds’ performance, which is already invested in the assets.
- Option to Switch
Under a ULIP Plan, a part of your investment is used as life cover, and the remaining amount is invested in the market linked securities, like debt, equity or a mix of them.
During the policy’s tenure, based on the market conditions and your changing risk appetite, you can switch your funds amongst different options, like, from debt to equity or vice versa. If you want to divert your savings to a safer option, you can invest in debt. If you are ready to take up a higher risk for higher returns, you can go for the equity option.
- Potentiality Better Than Others
ULIPs have the potential to earn and perform better than other life insurance products. As your amount is invested in different asset classes, and you get an option to redirect your funds depending on the movement of the market, ULIPs have the potential to fetch you considerable benefits. You can make also calculations using the ULIP calculator online easily to get a better idea.
Under other investment vehicles, your income/returns might be taxable if it falls under the tax slab.
- Lock-In Period Withdrawal Facility
When you buy a ULIP Plan, initially, there is a lock-in period of 3 to 5 years. During this, you cannot make withdrawals from your invested amount. After this period, if any emergency arises, you can withdraw an amount depending on your requirement, subject to certain conditions. It will just levy an additional charge, and you will receive the amount within a few days.
Due to certain conditions, if you are unable to arrange for funds to pay your premium, you can even opt to discontinue your policy, and your funds will be added to the discontinuance funds. Under this, you will be able to receive stable returns on the amount you invested before discontinuing your policy.
- Offers Liquidity
If you have signed up for a ULIP Policy, you can accomplish your short-term goals. You can withdraw the amount in parts after the lock-in period ends and fund your immediate requirements. You might have to pay a small charge for the same.
- Goal-Based Planning
With the investment in a ULIP Plan, you can fuel your long term objectives or goal-based planning. Generally, this includes wealth creation, retirement planning, a child’s higher education, etc. Depending on the market conditions and change in your plans, you can even increase the sum assured during the tenure.
In case of your untimely demise, your family members will get a fixed sum assured, which is exempted from tax deductions. For further calculations, you can use a ULIP calculator online.
After evaluating the amount using a ULIP calculator, it is crucial to choose the right insurance provider. A number of things vary across different insurance providers, like, the associated charges, benefits, terms and conditions, claim settlement ratio. It is advisable to choose a credible insurance provider with favourable terms and conditions to avoid issues later and benefit from uninterrupted benefits and services throughout the tenure.