We are mindful of several things while planning our finances in life. The primary purpose is to manage our expenses and savings efficiently to achieve various long and short-term goals. A valuable instrument that enables us to do that is life insurance policies. It helps in creating a financial support system for our loved ones to get through difficult times.
As an earning individual, it may be challenging to plan your finances in a way that ensures investment as well as security. Fortunately, a Unit Linked Insurance Plan or a ULIP policy allows both without having to compromise.
Many of us may prefer a ULIP policy since it enables the insured to create wealth and a financial shield for their families. Additionally, the tax benefits that come with a ULIP plan in India are appealing.
However, the tax-saving component of a ULIP policy is not the only benefit it offers. You may not be familiar with the other advantages associated with it. Let us discuss the ULIP policy in detail to know more.
How Does a ULIP Policy Work?
As you may know, the unique feature that sets a ULIP policy apart from other forms of life insurance is that it provides life cover along with investment opportunities. Much like any different insurance policy, it requires the policyholder to pay regular premiums towards securing life cover. The difference is that under a ULIP policy, a portion of that premium is used for investment purposes.
Depending on the profile of the policyholder and their risk appetite, it is invested in mutual funds. Generally, the policyholder can choose the type of investment they wish to make, for example, equity, debt, or hybrid funds. Insurance providers have fund managers that manage these investments so that the insured is not troubled over it.
Furthermore, most insurers allow the policyholder to switch between the equity and debt funds. Most people find it very useful as it helps in availing of maximum benefits possible.
Benefits of a ULIP Policy
A ULIP policy helps the insured to achieve their long-term goals by aligning their investment with life coverage. It has a variety of benefits to offer to the policyholder. Apart from the combination of coverage and investment, its tax saving component is attractive to many policyholders.
A ULIP plan in India allows the insured to avail of tax benefits under Section 80C of the Income Tax Act, 1961. The limit is Rs. 1.5 Lakhs per annum. Additionally, the maturity amount is also eligible for a tax exemption if they fall within the specified conditions.
However, it is in your best interest to learn how to optimize a ULIP policy’s benefits. Let us have a closer look at some other benefits of a ULIP policy that will help you get more out of it.
- Investment Cum Insurance
Every individual’s financial profile differs due to an array of reasons, such as the nature of income, dependents, lifestyle, and more. A ULIP policy ensures that the policyholder enjoys benefits of insurance and investment within one plan.
It assures you that your family will retain their living standards if something unexpected happens to you. You can avail of the benefits in the form of monthly income schemes as well. Moreover, you are entitled to an appreciable maturity benefit due to the investment component.
- Financial Gains
A ULIP policy has the potential to provide the insured individual with high returns. If you carefully assess the financial capability to take risks with mutual funds investments, they can offer excellent results. It is especially helpful in achieving milestone goals in life that demand more considerable expenses, such as buying a home or a car and providing quality education to your child.
- Partial Withdrawal Facility
In addition to that, a ULIP policy also offers a partial withdrawal facility to the policyholders. It means that they can withdraw a portion of the money from the fund before the policy tenure ends. It is a feature that is accessible after the policy has been in place for a specified period. It may prove to be useful in times when you are in urgent need of financial assistance.
- Switch Between Funds
A policyholder’s returns from the investments under a ULIP policy are subject to the market performance. Therefore, if you find that the market is volatile or unsuitable to your investment portfolio, you can switch between funds. As mentioned earlier, a ULIP policy allows the policyholder to make these choices to maximize the returns. However, it is essential to study the market well or rely on expert opinions to use the feature efficiently.
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Maximize the Benefits From Your ULIP Policy
Any decision related to the financial plan of your life is critical. One right move in the present can significantly impact the future of your family. Hence, be sure to choose a trusted insurance provider to get comprehensive solutions for all your needs. When it comes to the well-being and security of your loved ones, there should be no compromise.
