Getting started with unit-linked insurance plans (ULIPs)? Great decision!
ULIPs are market-linked unique insurance plans that combine the features of insurance and investment. Investors can mitigate the risk by investing in different types of markets, based on their risk-taking capabilities, and create wealth in the long run. There are many features of ULIP that make it stand out and emerge as one of the best investment plans out there.
In this article, we will discuss the benefit of ULIP Investment over other investment options.
What are the Top ULIP Plan Benefits?
- Flexibility: ULIPs give you a lot of freedom to customise your investment portfolio based on your financial objectives, risk tolerance, and time horizon. You can select from various funds, including balanced, debt, and equity funds.
You can change your investment allocation towards life insurance and portfolio investment to meet changing needs and requirements. On the contrary, mutual funds have limited investment allocation freedom, while conventional life insurance contracts are not considered investments by many.
- Insurance Coverage: ULIPs are a two-in-one investment choice because they provide both investment opportunities and insurance coverage. A portion of your premium goes into insurance, which protects your loved ones financially in the event of your untimely death, which also reduces the cost of your insurance by having this coverage. In addition, this insurance coverage saves cost investment opportunities and savings over purchasing a separate life insurance policy.
- Tax Advantages: ULIP funds are eligible for tax advantages under Sections 80C and 10(10D) of the Income Tax Act. Section 80C allows you to deduct up to ₹1.5 lakhs from your premium payments, which lowers your taxable income. Even on death maturity, benefits are exempt from taxes under Section 10 of the tax code 10(10D). Mutual funds or ETFs, in contrast, do not provide tax benefits, except for ELSS.
- Transparency: ULIP plan provides transparency regarding investment fees and costs, which makes it simpler for investors to understand the cost of investing. Even in this, all the costs associated with premium allocation, fund management, mortality, and policy administration are all clearly disclosed. This transparency enables investors to select the best ULIP policy for their investment needs and requirements.
Top insurance plans like the Tata AIA ULIP plan offers great transparency in terms of ULIP charges and all. There are also other plans that maintain this level of transparency.
- Higher Returns: Compared to conventional life insurance plans, ULIPs have a higher return potential. The primary reason behind this is the exposure to equity and debt markets. Traditional life insurance plans, in comparison, have a fixed investment component and give lower returns than ULIPs.
- Cost Efficient: ULIPs are a more cost-effective investing alternative than mutual funds since they have lower fund management fees. Furthermore, ULIPs don’t have an exit load, making it simpler for investors to sell their shares if necessary.
ULIP plans are a great way to invest in the long run and create wealth. However, no matter how easy it seems, there are some ambient challenges that entail any investment tool. There are hidden costs and charges, and penalties that can often cause a dent in your overall return. It is, therefore, always recommended to consult a financial advisor or choose plans like the Tata AIA ULIP plan, where a team of experts guide you through.