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How Versatile are ULIP plans?

ULIP Insurance is one of the most popular investment choices for those looking to make calculated investments that enable wealth creation.

How Versatile are ULIP plans?
ULIPs give you a choice to invest your money in various equity, debt, liquid, or balanced funds, depending on your risk tolerance.

As time has passed, the cost of living has gone up. What your money bought you ten years ago is worth far less now. Despite rising salaries, there may still be instances when you wonder where all of your money goes. As a result, saving is challenging. Although saving money is crucial, it isn’t always as simple as one might think. Additionally, it takes expertise to make investment choices that will allow your saved money to grow and increase.

A Unit Linked Insurance Plan (shortened as ULIP) is a popular investment vehicle that also offers life insurance protection. ULIP Insurance is one of the most popular investment choices for those looking to make calculated investments that enable wealth creation.

Understanding The Purpose of ULIPs

ULIPs enable you to build a corpus for your long-term goals, including your dream home, your child’s education, retirement, and more, through systematic investing and market-linked returns. In addition, a life cover guarantees that your objectives are met even in an unanticipated circumstance.

ULIPs give you a choice to invest your money in various equity, debt, liquid, or balanced funds, depending on your risk tolerance. The returns are also tax-free under Section 10(10D) of the Income Tax Act of 1961. In addition, the premiums you pay are deductible from your taxable income (up to ?1.5 lacs) under Section 80C. Here’s a thorough explanation of how a ULIP operates.

Depending on your choice, this premium may be paid in one lump sum, monthly, quarterly, or semi-annual. After deducting the applicable charges, the premium paid by you is invested in funds of your choice. After investing the money, the corpus is divided into units with a certain face value. Units are then allocated in proportion to the invested amount.

The quantity of units you receive depends on how much money you have invested. Net Asset Value (NAV) refers to the value of these units at any particular time. Calculating ULIP returns usually entails taking into account the market performance of your corpus and ULIP fees, along with your investment choices. As per the T&Cs of the policy, you are eligible to get a maturity benefit at the conclusion of the ULIP’s period.

What Makes ULIPs flexible?

The ability to switch funds is a headlining feature of unit-linked insurance plans, giving the policyholder a lot of flexibility. As an investor, they can place their money in debt, equity, liquid, or a fund that combines debt and equity funds. In addition, policyholders can move their investments from one ULIP fund to another under this policy. These transfers may also be for whole or partial units, which makes them even more appealing.

Due to this flexibility, different types of investors can manage their ULIPs in accordance with their risk appetite and expected returns. Some of the popular forms of using ULIPs are:

ULIPs as Child Plans

A parent’s most important financial objective is to create a comprehensive savings strategy to safeguard their child’s future. In addition, parents need to consider their children’s educational goals, particularly in terms of paying for their higher education. A ULIP plan can be an excellent starting step in such a situation. In essence, ULIPs are savings plans that support the development of an investment discipline. They provide market-linked returns, and in the case of child plans, you can benefit from the power of compounding by starting as soon as the child is born and staying invested for a long time. Every ULIP policy has a five-year lock-in period. Thus, ULIPs gradually contribute to wealth creation for children.

ULIPs as Retirement Plans

According to the policyholder’s risk tolerance, a ULIP offers a variety of fund selections, and ULIPs also allow the option of switching between funds. In addition, the policyholder is entitled to maturity proceeds at the end of the policy period.

Over the long term, equity often performs well. ULIPs are a wise choice to enhance one’s retirement portfolio because of this. One should invest in equity-oriented funds in their twenties and early thirties if they want a sizeable corpus saved up for retirement. Then, as you age, you can progressively switch investments to more cautious debt funds.

ULIPs as Wealth Creation Instruments

If you do not have a specific goal, you can still choose to invest in ULIP insurance for wealth creation purposes. At all stages of life, the corpus created by your ULIP can come into play, and even if it doesn’t, it can keep accumulating and growing.

Conclusion

Because they offer policyholders both a life insurance plan and an investment plan, ULIP insurance is a financially sound insurance option. In addition, they have a lot of versatility, which increases their appeal. Make sure you compare different ULIP insurance plans with an online ULIP return calculator. Additionally, reading the small print before buying a plan is crucial to avoid being caught off guard later.

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