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Is It a Good Idea to Invest in a ULIP?

Is It a Good Idea to Invest in a ULIP?

A survey found that 2 out of 3 Indians wished to invest in a ULIP plan in 2021. In fact, the affinity towards these products had highly increased in 92% of the participants after the first COVID wave when things had returned to normal. ULIP remains a popular investment tool due to its dual benefit of insurance and investment. This is quite advantageous over traditional vehicles and lets you achieve life goals with a single plan.

Yes, it is definitely a good idea to invest in an ULIP for a robust safety net. They can optimise returns which makes sense in this post-pandemic world. It is the best choice if you have a good risk appetite and can beat popular insurance products. Read on to know why else an ULIP could be the ideal option for every investor.

Tax Benefits

A unit linked insurance plan offers a tax rebate on the premium. It is under Section 80C of the Income Tax Act, 1961. The upper capping is up to ₹1.5 lakhs. This way you are able to generate a significant corpus for future needs. It is applicable if the premium you pay is below 10% of the sum assured to be received. But the aggregate annual premium should be up to ₹2.5 lakhs per year to enjoy this benefit as per the Budget 2021 proposal.
There are no taxes on the surrender value as well. The maturity money that you receive after 5 years of the lock-in period is free of deductions.

Flexible Fund Option

The top investment company lets you choose from 2 unit linked insurance plan options:

  • Bond Fund II
  • Balanced Fund II
  • Enhancer Fund II

This is because wealth creation must be well aligned with your risk appetite. The returns will depend on the scheme chosen by you. Premium re-direction is also allowed so you may divert your future premiums to a different choice of a fund in the ULIP. It is a good idea to talk to a financial expert and chalk out an investment strategy.

®   Long-Term Wealth

ULIP can act as a long-term savings plan. They come with a 5-year lock-in period that helps inculcate strong and disciplined investing. This is because you cannot encash the amount during this time frame and the money grows steadily. It is usually calculated from the date of starting the plan for utmost transparency. Investors may pay the premium on a monthly or annual basis. Accomplish multiple future goals like buying a dream car, home extension, an international trip, higher education or a wedding without touching your savings pot.

®   Rupee Cost Averaging

You can reap the benefits of rupee cost averaging in ULIP. Start by paying the premiums on a monthly mode and use the systematic transfer option. There is also an option of creating an SIP to an equity fund in ULIP. All of these make sure your parked money is growing well. The ULIP can liquidate a part of units and invest the money in an equity fund.

In short, an unit linked insurance plan is a suitable investment plan for risk-takers. They offer potentially better returns when compared to their peers due to the diversity of funds offered. Read the terms and conditions carefully before starting a plan.


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