ULIPs which stands for unit linked insurance policy, is a life insurance return used to cover up the risk by the owner of the policy. It also provides investment opportunities in stocks and mutual funds. Since ULIPs provides protection and investment at the same time to the policyholder, the plan can be managed according to need and priorities.
In ULIPs, policy owners pay a secure premium for a period of 5 to 10 years. Within that premium, a small allocation of an amount is deducted as maintenance charge for fund and policy management. Rest of the fund is kept for protection cover. This fund comes under the category for equity and debt. Depending upon how much risk a policy holder can take, he or she can choose either high-risk fund which gives more disclosure or debt fund which offers low risk.
As there are many investment options available in the market, choosing the best one is little tough. So for taking the right plan, you need to check certain benefits such as wealth protection, flexibility, tax saving etc.
Once you take ULIPs plan, you cannot withdraw money for at least 5 years. Therefore, this period is called as Lock-in period. If you want to withdraw money in between the lock-in period then certain conditions and some charges are applied for it. Moreover, if you are withdrawing money after the lock-in period then no tax will be charged.
The advantage of taking ULIPs plan:
- ULIPs help in saving money to fulfil some of your higher goals such as purchasing a house or higher education of children, etc.
- By taking ULIPs plan you can save the future of your loved ones.
- According to the need, you can make a shift between your investment funds.
- ULIPs give you the facility to leave your fund depending upon charges and condition.
- Since ULIPs main objective is to build wealth in a long run, it gives you the opportunity of investing to earn profit besides, taking care of protection needs.
- The investment which you do in ULIPs can further be invested in debt or equity. In this way, you can enjoy the benefit of tax deduction over premium paid.
With the top-ups available with ULIPs policyholders can invest their additional cash, in case the premium of these top-ups remains less than 10% then policyholder can also take the advantage of tax benefit.
Top-ups investment does not make any effect on financial planning as these investments generate an additional return to handle your tax debt.
Those who are looking forward to get high return must go for ULIPs plan. People invest in different type of plans today. But balancing different type of plan is a difficult task. Therefore, it's necessary to choose a plan that can offer extensive benefits. In that sense, ULIPs is one of the best plans which offers protection, investment, tax saving and much more. Above all the plan has different layers of investment options. So, you can invest according to your requirement.
