A Unit Linked Insurance Plan (ULIP) is a combination of insurance and investment. Thus, it has a market-linked component where you invest in different funds. In addition to that, it has an insurance component that comes with death benefits. It is a popular plan among people for this reason and more. So, if you are wondering why people invest in ULIPs, then read on to find your answer.
#1 The dual benefits of insurance and investment
The most important feature of a ULIP plan is that it ticks both the boxes of insurance and investment. So, you can secure the financial future of your family through the insurance component. The investment component can help you save up regularly to meet your long-term goals. As such, ULIPs help in meeting two of your most important goals in life – keeping your family financially secure and fulfilling your long-term life goals.
#2 The flexibility of the investment
ULIP offers several layers of flexibility. You can choose the policy term that best meets your goals. For instance, you can choose ten years, fifteen years, or twenty years as per your convenience. You get to choose between either debt or equity or balance out the two in your portfolio. You can lean more towards debt funds and stay safe throughout, or you can choose something riskier like equity funds.
Also, you can start with greater equity investments and increase your debt investments towards the end of the term. As you can see, there are several ways to customize the plan to make it more suitable for your needs.
#3 The tax benefits associated with the ULIP plan
According to Section 80C of the Income Tax Act, 1961, all the premiums you pay for the ULIP receive tax exemptions up to ₹1.5 Lakh. The maturity and death benefits under the plan also receive tax deductions under Section 10 (10D) of the Income Tax Act.
Thus, the ULIPs are relied on by everyone who wants an assured way to save on taxes. Regardless of whether you are a new investor or a savvy one, the tax exemptions are lucrative to everyone and across all major income groups.
#4 A great way to learn financial discipline
ULIPs have a lock-in period of five years, during which you are not allowed to withdraw anything from your account. This lock-in period is a way to develop financial discipline in you that can help you reach your future goals more easily. In addition to that, you are supposed to pay a regular amount for the fund that goes into the premiums for the insurance and your investment. It further builds your discipline to save the necessary amount for your long-term goals.
#5 Achieving the life goals in a planned manner
ULIPs are meant to help you achieve long-term life goals, be it your kid’s wedding, retirement, or EMIs for your home loan. For instance, you can save up to ₹30 Lakhs over a period of fifteen years and use that to finance the higher education of your kid. Or, you can save up more and extend the term further to let it act as your retirement income.
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So, investing in ULIPs is a sound idea in more ways than one. If you are yet to invest in it, then now is a good time to consider it.
Click here to know more about Kotak Life ULIP Plan: https://www.kotaklife.com/online-plans/ulip-plan
