ULIP full form stands for Unit Linked Insurance Plan, which is a product with multi-faceted product. It is a combination of investment and life insurance that requires the policyholder to make regular payments of premium, out of which a certain part is used for the coverage of life insurance. The remaining amount is pooled with the assets that are received from several other policyholders and are used for investment in various financial instruments. With a ULIP plan , people can not only secure their future financially but also grow their money.
ULIP plan is a fantastic scheme for those who want to save their money but also dip their feet in investment. They get the opportunity to invest in debt, balanced funds, equities, and long-term investments. Though the plan is subjected to market risk, it also enables people to invest based on their financial goals and risk appetite. To get a better understanding of the amount to invest, one can use a calculator to estimate the payable premium amount and the expected returns.
Here are some of the benefits of having the best ULIP plan in India:
1. Returns are Market Linked: With ULIP, policyholders get the opportunity to earn market-linked returns by allocating a certain amount of their premium in investing. These investments can be made in market-linked instruments such as equity and debt.
2. Savings with Life Protection: In addition to the option of investment, the ULIP plan also offers solutions to policyholders to take care of the financial needs of their loved ones in case of emergencies. This not only inculcates a saving habit but also enables building substantial wealth in the long term.
3. Flexibility: ULIP assists in achieving financial goals by enabling –
• Change in investing funds according to one's changing demands.
• Making partial withdrawals after the initial 5-year lock-in period has expired.
• Single premium additions to invest more funds (in addition to the normal premium) as and when needed.
4. Premiums at a Fixed Level: All regular premium or limited-term premium payments under a ULIP plan have a uniform or level payment structure. In case of life insurance coverage, the additional payment of premium is considered as a single premium.
5. Charges are Distributed Evenly: According to IRDAI, the charges assessed on ULIP plans are evenly spread during the 5-year lock-in term to help insurers avoid significant upfront expenses. It
6. Tax Benefits: The premiums paid towards ULIP plans are tax-deductible up to Rs. 1.5 lakh under Income Tax Act of 1961, Section 80C. At the same time, the ULIP plan's maturity/death benefit is tax-free under Section 10(10D) of the Income Tax Act 1961.
Once an individual has gathered enough information and knowledge on the ULIP plan, the next step is to pick out the best insurance, as there are several options available. So, before investing in a ULIP plan, it is advisable to do some research and comparison to find the best ULIP plan in India. Following are some critical points to consider before picking the ideal ULIP plan:
-Assessing one’s objectives
-Selecting the right amount for Life Insurance Coverage
Stay Invested for a Longer period
Take advantage of maximum tax benefits under sections 80C and 10 (10D)
There are several fund options that are available for investors to look in to. Following are some of them:
a) Equity Funds
The allotted investment amount in an equity fund of ULIP plans is utilized to purchase equities with a Net Asset Value (or NAV) connected with them. The price per share (or 'unit') in a Fund is known as the NAV. Because ULIP plans are market-linked instruments, equity investments have a significant inherent risk due to market fluctuations, as their full name suggests. Equity investments, on the other hand, can be the most profitable.
b) Debt Funds
The premiums that are allocated to debt funds are used to invest in low-risk securities such as government bonds and debentures. Debt funds, in comparison to equity investments offered in ULIP Plan, may provide a lesser return on investment than equity investments in ULIP plans.
c) Balanced or Hybrid Funds
Hybrid or Balanced Funds are developed for ULIP plans to provide capital growth (from the equity component) while lowering the risk (due to the debt component.) In the event of market swings, any loss from the equity element is offset by the lower risk but constant returns from the debt portion of the fund.
ULIP plan is a great way of investing for those who are looking for a balance of saving and investment. With the right premium and plan, individuals can quite easily and quickly reach their targeted goals and enjoy a comfortable future. In addition to saving the plan also acts as a fantastic investment tool which is a great way of increasing wealth substantially.