The point of investing money in any tool – be it shares or a new business enterprise – is to create wealth for the future. But wealth creation is all about choosing the right investment vehicle, and staying the course so that you can reap the rewards of compound growth.

There are few investment opportunities that make sense on every parameter, from affordability to low risk, and from high returns to flexibility. A Unit Linked Insurance Plan (ULIP) is one such opportunity. This article takes a detailed look at ULIP plans in India, and how they can benefit you.

What are ULIPs?

At its simplest, a ULIP is a life insurance product that insures your life and also offers exposure to the markets. Your premiums towards the policy are divided into two components: One pays the premium for the plan, while the other invests in high grade market securities. Thus, it offers the benefit of protecting your future interests with investment growth.

The benefits of ULIPs

* ULIP plans are some of the most stable and low-risk investment options provided by insurance companies and banks in India. The ULIP promises good returns as well as life coverage for your loved ones. This is its dual benefit – your premium pays towards future growth and life security. Your money is invested in both equity and debt securities, and you have the liberty to choose the percentage of equity:debt exposure as per your risk appetite and goals.

* ULIP plans in India are amongst the best tools to provide annualised returns.

* ULIPs offer both maturity and death benefits. You can gain substantially on the policy’s maturity, while your loved ones remain protected if you are unfortunately absent while the plan is active.

* They offer a lower proportion of risk though they are connected to the open markets. The insurance provider invests a part of your premium in high grade securities with a longer vesting period. This lowers risk by reducing the year-on-year negative performance (if any) and accruing returns every year.

* ULIPs offer tax benefits in India – the premiums paid are exempt under Sec 80C of the Income Tax Act, 1961.

* The plan allows you to fully or partially withdraw funds after five years of investment are complete. This feature helps those who are in need of urgent money.

* The insurance provider offers a dedicated fund manager to manage your ULIP plan for you. The manager oversees your investment, keeps a watch on latest market trends and periodically advises you on changing unit allocations for higher appreciation on the investment. You are not tasked with monitoring daily NAVs either – the fund manager does everything in a professional, transparent manner, so you don’t have to.

Should you invest in them?

If you have dreams for the future, and wish to get market exposure in as safe and structured a manner as possible, then a ULIP plan is definitely one to consider. Adding a ULIP to your investments portfolio offers a stable asset class that is affordable and systematic in approach.

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