The uncertain global scenario has highlighted the essence of investment and insurance in your life. Investment is important to make sure a convenient standard of living in upcoming times, considering the rising inflation rate. An insurance policy is very important in your family if you have a dependent/dependents.
A single premium term insurance may be sufficient for your family’s protection needs. However, in the case, you are looking for an investment solution linked with insurance, then you may opt for the ULIP policy. A ULIP (unit-linked insurance plan) is an important life insurance policy that provides twin advantages of investment and insurance. Note that if you are unsure about the premium amount you must deposit to attain a specific goal corpus, then you may take the help of an online ULIP calculator.
Let’s now discuss what’s ULIP and the four essential reasons that emphasise its importance.
What’s ULIP policy?
ULIP insurance is an important life plan that offers two crucial benefits – investment and life cover benefits. Insurers use one portion of the premium proceed you pay for life cover and another to invest in an investment instrument linked with the market for higher returns. Additionally, the plan offers to add-on rider options like accidental benefit rider, critical illness rider, a permanent disability rider, etc.
For instance, the serious illness rider would offer a specific amount to pay for medical expenditures when you are diagnosed with any serious illness initially in your life. Read on to know about the ULIP plan.
Critical importance of the ULIP plan –
Investment benefits along with life cover
Affordability, as well as risk appetite, are the crucial constraints while factoring in market-associated investment instruments. You must ensure to spend more and assume a substantial amount of risk to earn reasonable returns. However, various family-linked commitments usually restrict the extent of risk that you can take up and the amount you can invest confidently.
Using ULIP insurance, you can become assured of market-based investment and life cover according to your risk profile. The life cover ensures the sum assured to your nominee in the case of any unanticipated death in the course of the policy tenure. This is a cost-effective policy to meet all your financial requirements.
Flexibility is a necessary aspect of a financial instrument. It assists you to customise the plan for your financial needs. ULIP benefits come with crucial importance owing to its flexible feature. Read on to understand this in detail –
- Fund portion invested for market-related returns in financial securities depends on your risk level. For instance, you can select to make an equity investment in the case you have a high-risk appetite, a debt fund in the case you have a low-risk appetite and a hybrid fund in the case of moderate risk.
- Also, you can get the choice to switch between funds depending on market volatility. For instance, in the case, any economic slowdown is anticipated shortly owing to government policy, you may switch to the debt mutual fund to secure your ULIP returns and investment.
- The plan even offers flexible premium payment choices. For instance, you can go for the regular pay mode for longer periods like 15 and 20 years, a limited pay duration of anywhere between 5 and 7 years or a single premium.
A single premium life insurance policy is highly preferred by many who are on the look for higher and safe returns over the long term. The premium may be cheaper if you begin investing early in your life. The reason is the possibility of having a preexisting illness or other health conditions is less if you are younger lowering your demise possibility, which is a main consideration for insurers while computing the sum assured and premium.
Long-term and secure benefits –
Majorly, investors look for safety to be a crucial factor when selecting investment options. ULIP is looked upon as safe owing to three main reasons. Read on below to know.
- Insurers offer distinct combinations of funds that you can select to invest in depending on your risk level. As the funds are properly managed by the expert team facilitated by an insurance provider, they are reliable.
- By shifting between funds depending on the volatility levels of the market, you can protect your investment from drastic losses. The plan even offers total transparency of fund value at specific intervals. You can either choose a fund manager to make necessary switches timely or notify you of the need and allow you to conduct fund switches.
- Moreover, ULIP come with a lock-in of five years, post which you can partially withdraw. Even if volatility in the market persists for some time, it corrects itself to provide constant returns within a lock-in period of five years. Also, this ensures you invest in a long-term period to generate higher ULIP returns.
- Tax benefits – Of late, ULIP insurance comes with critical importance owing to the availability of tax benefits. The premium amount paid on ULIP policy, and the payout offered as returns provide tax deduction benefits as per Section 10 (10D) and Section 80 C of the IT Act Act, 1969.
Ending note –
ULIP policy comes with critical importance and must be included in your financial plan. Doing so would ensure dual advantages of investment and life cover options depending on your risk appetite level. Next, it provides a flexible choice to switch easily between funds depending on price fluctuation and market volatility. Thus, if you are looking for insurance and investment, both, for the financial security and stability of you as well as your family members, ULIP insurance is just an ideal choice.
So, ULIPs offer flexibility in terms of premium payment. You get the choice to shift your investments between debt and equity funds. ULIPs permit you to simply withdraw a portion of your fund whenever you require it. Also, you can select where to invest based on your risk appetite level. Additionally, ULIPs even provide you with tax benefits as mentioned above on your premium paid and returns received by the closure of the insurance policy.
So, in case you are confused as to how much you must invest monthly as a premium to generate a specific corpus through ULIPs, then like an online FD calculator, you can also make use of an online ULIP calculator.