Financial planning helps in meeting short-term and long-term goals and also aids in a secure future. There are numerous financial investment options available to the Indian investors. Among these options, Unit-Linked Insurance Plans (ULIPs) are a popular investment vehicle.
ULIPs are a type of life insurance plans, which offer dual benefits of insurance as well as investment. As the name suggests, such an investment option is a market-linked product and hence, is subject to risks associated with the capital markets. You may invest in stocks, bonds, or mutual funds, as per your needs and risk appetite.
There are numerous ULIPs in India, which come with a host of features and benefits. ULIPs have garnered the attraction of Indian investors due to the numerous advantages it has to offer. Following are six reasons why ULIPS are attractive to Indians.
1.Different risk appetite
While some investors have a large appetite for risk, some may be conservative in nature and hence, seek to make low-risk investments. ULIPs provide an option of investing in high-risk as well as low-risk instruments. If you have a huge risk appetite, you may invest in equities. However, if you are risk-averse, you may prefer investing in both debt and equity in order to enjoy high returns at minimal risk.
Based on capital market trends, you may switch from one asset class to another. You may even change your ratio of investment across equities, money market instruments and debt instruments. If you witness a positive trend in the performance of the capital, you may invest in equities. Similarly, if the market fails to perform, you may switch from equities to relatively safer asset classes such as money market instruments or debt instruments.
3.Significant tax benefits
One of the most attractive features of a ULIP is the tax benefits offered. Under the Income Tax Act, 1961, tax benefits are eligible on premiums paid as well as the withdrawal amount. Under Section 80C of the Income Tax Act, 1961, you may claim up to INR 1.5 lakh on premiums paid. The death benefit is tax free. Moreover, you may enjoy tax benefits of the maturity amount under Section 10(10D) of the Income Tax Act, 1961.
4.Availability of top-up option
You may extend the coverage of your insurance plan by paying an additional premium. This option, known as top-up, ensures that you receive maximum coverage under your ULIP. Moreover, top-ups are eligible for deductions under Section 80C of the Income Tax Act, 1961. However, you are eligible for such tax benefits only if the aggregate premium is not more than 10% of the sum assured.
5.Long-term in nature
An important aspect to take into consideration while investment planning is long-term financial security. ULIPs are long-term in nature and hence these appeal to investors who want to meet their long-term financial goals. The amount collected may be used for a variety of purposes, such as children’s education, marriage, retirement planning, emergency expenses, besides many others.
Investing in ULIPs allow you to enjoy the dual benefits of life insurance and market-linked returns. It also inculcates a habit of regular savings and helps you accumulate wealth in the long term. You may, therefore, compare the best ULIPs and choose one that meets your financial needs.
Related Artilce :
- What is ULIP Plan
- Different Types of ULIP Funds in India
- ELSS and ULIP - Detailed Comparison
- Types and Benefits Ulip Plans - Here's What You Need to Know
- Unit Linked pension plans or NPS: What to choose?
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