Savings and investments complement each other. They are an important part of our life, especially during these testing times. With inflation, you need to ensure that you have sufficient funds to meet various costs, such as food, healthcare, and children’s education along with other day-to-day expenses. Choosing the right investment product is crucial but it is not easy. You need to understand how different products work and select the one that best fits your requirements and risk appetite.
Today, various investment options are available in the market, and certainly, the priority of investors is to earn attractive returns on the invested funds. However, the returns depend on the type of investment instrument you choose. Every investor wants to earn high returns; however, the risk-taking ability plays an important role when it comes to opting for the ideal investment avenue. When you choose to invest in products like gold, there is minimal risk associated with it. Alternatively, you can consider an investment instrument like a Unit-Linked Insurance Plan. However, before you make a decision, do understand the UnitLinked Insurance Plan meaning.
What is a ULIP?
Prior to investing in various instruments, you must first invest in a life insurance plan. Such a policy will ensure the financial stability of your loved ones in case of your absence. With a ULIP, you can get a dual benefit of investment and insurance.
A ULIP helps you get a sizable corpus at the end of the tenure along with the amount assured committed under the life insurance plan. In case of an unfortunate event, the company will pay the entire sum assured to the beneficiaries along with the accrued corpus.If you survive during the policy’s duration, you receive the maturity benefits at the end of the tenure.
Advantages of a ULIP
The biggest benefit of investing in a ULIP is dual protection. You get insurance and investment in a single policy. Some other fundamental advantages of a ULIP include:
- High returns
When it comes to returns on investment, a ULIP scores above a Public Provident Fund (PPF) or a fixed deposit. You need to have knowledge about the volatility of the market and make the right choice of funds. The value of a fund will be based on the Net Asset Value (NAV) on a particular day. When you invest in a fund, you need to consider the ULIP NAV.
ULIPs offer high flexibility as compared to other products. It is possible to switch between different types of ULIP funds, like equity, debt, and hybrid plans. A switch will not result in any expenses. You can choose the funds as per your risk-taking capacity. If you notice that a fund is not performing well, you can switch to a different fund for higher returns.
You can make partial withdrawals after the policy completes five years if you have an urgent financial requirement, without hampering the plan.
- Tax benefit
Apart from being a valuable wealth-creation tool, ULIPs are also a tax-saving investment alternative. In this investment plan, you receive a tax deduction on the premium up to INR 1.5 lakh as per Section 80C of the Income Tax Act, 1961. Moreover, the amount that you receive on maturity is exempt from tax under Section 10 (10D) of the Act.
Consider your risk-taking capacity and financial goals in mind when you choose an investment product. If you choose the right type of ULIP and remain invested for a long horizon, you earn significant returns.
By investing in a ULIP, you can achieve your financial goals. Identify the short- term and long-term goals and choose the plan accordingly. Keep the market movement and ULIP NAVin mind. ULIP has several benefits and offers flexibility, which is why it is a perfect wealth-building tool in India.