Did you know that many households in India do not buy life insurance policies just because they consider them to be unimportant and expensive? This fact comes out of a survey carried out by the Insurance Regulatory and Development Authority of India (IRDAI) and reported in a MoneyControl news story.
While undertaking financial planning steps, a lot of people often struggle with provisioning for insurance and other investment options. What if you can get the benefits of both insurance cover and long-term investment from a single financial instrument? Well, this is precisely what you get when you invest in a unit-linked insurance plans or what is commonly known as a ULIP. Outlined below are some great benefits of ULIPs that make it a desirable financial investment option for people across all income groups. And if you are still uncertain, you can use online tools like a ULIP return calculator to estimate just how much you stand to gain.
Top Benefits of Unit-Linked Insurance Plans
- Provides greater flexibility to the investor – ULIPs come across as an ideal investment option for people with varying risk appetites. It lets you set aside a portion of your investment into an insurance product and gives you the leverage to decide the asset class (debt/equity/balanced) where you can invest the remaining amount.
- Allows you to switch between funds – One of the most striking features of a ULIP policy is that you can make switches between investments in different asset classes, i.e., debt funds, balanced funds and equity funds. This ability to switch between funds can help you better manage the different stages of your life. For instance, if you are coming closer to your retirement age, your risk appetite is bound to be lower and you can therefore make a course correction by switching from an aggressive to an ultra-conservative investment portfolio.
- Offers great transparency – With this investment choice, you get to decide your sum assured, i.e., the guaranteed amount that your nominee will receive in your absence. You can opt for different riders, such as disability cover, to further bolster your interests in the event of an unforeseen incident. A good thing is that you don’t have to take out a calculator to assess the return on your ULIP. The daily Net Asset Value or NAV reporting keeps you on top of things when it comes to knowing the actual current value of your investments.
- Assigns a dedicated fund manager – The role of a fund manager is to best utilize the corpus of funds pooled by ULIP investors and make smart investment decisions on their behalf. This ensures that even if you don’t have the required know-how of the market, there is a competent person in the form of a fund manager who is taking those decisions on your behalf.
- Delivers tax saving benefits – The fact that ULIP premiums are deductible from your taxable income up to a maximum of ₹1,50,000, as provisioned under the Section 80(C) of the Income Tax Act, makes ULIPs a popular tax-saving financial instrument as well.
Since investments in ULIPs are directly linked to market performance, it becomes important that you read the offer document carefully and absorb the risk factors before making a buying decision. So, if you haven’t already invested, there is no dearth of resources online, such as a calculator that you can find on insurance portals, to help determine your exact ULIP investment.