Every family has an earning member who looks after their financial well-being. As a breadwinner of the family, you might aim for the long-term financial well-being of your loved ones, even in your absence. During your active working years, you might have either saved money or invested in the different investment tools to financially protect your loved ones.
Although there are several investment products in the market, the new-age Unit Linked Insurance Plan (ULIP) has won the hearts of many investors. A ULIP plan is a dual-benefit product, which is a combination of investment and life insurance. From accomplishing your investment goals to building a corpus to achieve your Life Goals, a ULIP plan ensures your investment would turn into success.
Before purchasing a ULIP plan, let’s first understand what a ULIP plan is in detail to provide you with more clarity:
What is ULIP plan?
A ULIP plan is a unique financial product, which combines the benefits of Life insurance and investment under a single integrated plan. Moreover, it is a flexible, affordable, and transparent product. On investing in a ULIP plan, you should regularly pay premiums as per the premium payment frequency you have opted for. As a policyholder, you can pay the premiums monthly, quarterly, half-yearly, and annually.
During an unfortunate event, a ULIP policy offers specific benefits to your nominees. The pay-out, which your beneficiaries receive in your absence, is known as a death benefit. Your nominees can either obtain the death pay-out every month or in a lump-sum.
Apart from family protection, a ULIP plan offers a few other financial benefits for you. As a policyholder, you can fulfil your financial goals when you are alive. Let’s take a look at these top four living benefits offered by a ULIP plan:
It acts as a safety net
Due to the unpredictability of life, you might be unable to ensure your family’s safety in the future. Today, critical illnesses and physical disabilities have become a major threat. During these emergencies, your savings can fall short due to the high cost of medical treatments. For covering these risks, you should invest in a ULIP plan since it offers additional benefits in the form of riders. As a policyholder, you can select from critical illness rider, accidental death rider, a physical disability rider, and so forth.
It helps to generate more money
At a young age, you might have ditched your long-term goals due to financial responsibility towards your family. These goals can either be purchasing a new house or a car, traveling to new cities and so on. While your goals might remain unfulfilled at an early stage of your life, you can turn these dreams into reality by investing in a ULIP plan. If you purchase a ULIP plan at a young age, you can develop a large corpus for achieving your goals in the future. Start by investing a small amount every month during the initial stages of your career, and once it skyrockets, you can increase your investment amount.
It offers tax-saving benefits
Under a ULIP policy, you can claim tax deductions according to Section 80C and Section 10(10D) of the Income Tax Act, 1961. As a policyholder, the premium that you pay is deducted up to Rs. 1,50,000 on your taxable income. In addition to this, the maturity pay-out given to your beneficiaries is tax-free under Section 10(10D) of the Income Tax Act, 1961.
It diversifies your investment portfolio
A ULIP plan gives you the opportunity to protect your investments from market fluctuations. When you invest in a ULIP plan, you can choose either equity or debt funds based on your risk appetite and investment goals. For instance, you can select an equity fund since you can afford risks as well as have fewer financial responsibilities at a young age. As you grow older, your risk appetite typically reduces due to more financial dependants in your family. Therefore, you should switch to debt risks at an older age to balance your invested capital.
In a nutshell, staying financially fit has become everybody’s prime aim today. Therefore, you should invest in a ULIP at a younger age. When you invest early with proper planning, you would have a relatively less financial burden in the future. However, before purchasing a ULIP policy, consider your needs, compare multiple ULIP benefits, and invest in a policy based on your preference.