ULIP – A Comprehensive Guide

We tend to take an interest in any investment that has the potential to give the tiniest percentage worth marginal returns. Wouldn’t it be interesting if you could invest in a scheme that not only ensures you but also has the potential to offer some market-linked returns through your investment?  Yes, we are talking about ULIPs. ULIPs stand for Unit Linked Insurance Plans that provide a dual purpose. A portion of the premium you pay goes towards investing, and others go towards providing coverage.

Let us dive deep into what ULIP is:

Essentially, ULIPs act as dual-purpose investment vehicles. What ULIP does differently from other plans is that it allows you to get insured with the plan and provides periodic returns during the vesting period. The added benefit of going with the ULIP policy is that the portion of your insurance and the investments are flexible. The investments can be tuned according to your needs. You can invest it in a hybrid option that includes a tailor-made mix of equity and debt, or you can invest it in either equity or debt.

Here is how ULIP works for you:

A ULIP plan provides you with the following benefits:

  • Life coverage and investments appreciation
  • Balanced risk and better returns
  • A fund manager manages your policy

What is ULIP’s way of standing out in the crowded market?

In today’s day and age, having a policy that can do more than provide you with coverage is game-changing. ULIP policies provide you with returns from your investments. It is a comprehensive and intelligent choice because of the nature in which it operates. The policy is now seeing traction amongst people as it is beneficial and the massive value it drives for an individual.

You also get tax benefits under Section 80C of the Income Tax Act, 1961, for the premiums you pay towards the ULIPs, subject to the Income Tax Act, 1961 provisions. Apart from Section 80C, you also get benefits in Section 10(10D), which arrives upon maturity of the policy.

The way to get the maximum out of such a comprehensive policy is to start early. When you start early, you have the benefit of time. As we all know, compounding works miracles over time.

What to do before investing or getting insured?

  • It is important to understand what policy or investment vehicle you choose. This helps you make better decisions.
  • Now that you have understood your investment tool or an insurance policy, determine your needs and why it is relevant. This will help you choose the insurance premium sum or the amount you need to invest.
  • While doing so, setting aside a reserve fund of at least six months of income would be helpful as it would keep you afloat in case of crises.

Apart from the above points, research and know more about ULIP to make the most out of this investment vehicle.

Suresh KP

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