Is it a Good Idea to Buy ULIP?
As we all know, life insurance helps us secure the financial future of our family. However, many people are not very keen on buying a life insurance plan on the pretext that in case of survival, you do not get any returns, or even if you do, it is not always a profitable deal.
But do we really have to choose between the two extremes of either buying a policy and losing all our money or not buying one at all? The answer is no. ULIP is one such hybrid plan that offers you the best of both worlds. You not only get life cover but also wealth creation through a goal-oriented approach. As the name suggests Unit Linked Insurance Plan is divided into equal units. The value of each unit is determined by the value of the investments.
How does a ULIP work?
When you pay a premium for a ULIP, a part of the premium is invested in the capital market and the rest goes towards life cover. This plan offers you the freedom to choose where you want to park your money. You can either invest in debt or equity or a combination of both. Additionally, you can also switch your portfolio between equity and debt during the tenure of the policy depending on your changing risk profile without attracting any tax liability. This is what gives ULIPs an upper hand to mutual funds.
Your portfolio is handled by trained and experienced investment managers of the insurance firm sparing you the hassle of tracking your investments. Some companies also let you manage your own fund if you wish to do so. You also have the freedom to choose the term of the policy, the sum insured as well as the
premium payment term. IRDA requires ULIP to have a lock-in period of 5 years. You can surrender your policy after that and before the actual date of maturity but it is a good idea to stay invested for a long period of about at least 10-15 years to reap good returns on your investments. You are also free to increase your premium payments whenever you have extra savings.
This insurance policy is a great way to save for different goals such as retirement planning, education, weddings, home, etc. The policy offers income tax benefits for both the premiums and the sum insured. Upon the death of the policyholder, the sum insured is disbursed to the nominee. In some cases, the one with a higher value between the sum insured or fund value is disbursed.
To know more about ULIP and how you can reach your financial goal all while getting a life cover, contact our financial advisor.
The author of this article is Sufra. If you have any queries concerning the above article. Please write to us either in the comments section below or can reach out to the Financial Advisor on +91 7008797818.