Having a life insurance cover to protect your family’s financial future and build a corpus are probably the two most critical financial goals you would want to accomplish. And many of your financial decisions may revolve around these goals. This is mainly because you want your beloved family members to have financial security even when you are not around.
Keeping these goals in mind, insurance companies offer ULIPs or Unit Linked Insurance Plans. These insurance-cum-investment plans have gained immense popularity. If you are not sure about investing in ULIP, here are a few reasons why ULIP insurance is a worthy investment and a must-have in your portfolio.
Flexibility to invest in different funds to suit your risk appetite
When you purchase ULIP, insurance companies give you the flexibility to invest in a wide range of fund options, including stocks, bonds, equity and debt funds, to suit your risk-taking capacity and long-term financial goals. You also get to choose the percentage of funds you want to allocate in different funds.
For example, if you don’t mind taking risks, you can invest a significant portion of your money in equity funds. On the other hand, if you are looking for low-risk options and get stable returns, you can invest a significant portion of the amount in debt or hybrid funds.
You can benefit from the compounding returns
Historically, ULIPs have offered valuable returns in the range of 10-12% in the long run. And you can expect to get significant returns from your ULIP investment due to the power of compound interest. ULIPs have a lock-in period of five years, and you can withdraw the funds after the lock-in period is over. Thus, it allows you to get more returns than the typical savings account.
ULIPs are one of the most tax-efficient investment products in India. You can get a tax benefit on the premium you pay up to ₹1.5 lakhs under Section 80C of the Indian Income Tax Act. Also, the maturity benefits your family may receive in the event of your demise is entirely tax-free under Section 10 (10D) of the IT Act.
Flexibility to switch funds
ULIPs allow you to switch your investment in one fund to another so that you capitalise on the market trends and maximise the returns. Generally, all insurance companies allow free switching of funds only a limited number of times in a year. And, if you exceed the number of free switches, you may have to pay fund switching charges.
You must monitor the market movement carefully so that you can switch the funds promptly and ride the market volatility and get higher returns.
ULIPs are primarily life insurance products. It gives you the assurance that your family’s financial future is secured. The coverage offered in ULIP is usually at least ten times more than the annual premium amount.
With so many amazing benefits, there is no reason why you must not have ULIP in your personal investment portfolio.