Are you out looking for financial investments that can give you wholesome coverage at low rates? Well, you may find that there are many financial instruments in the market like mutual funds, insurance plans, fixed deposits, and debt funds to name a few, creating a way for you to make investments. Among all these, one of the most widespread and steady instruments for wealth creation is the Unit-Linked Insurance Plan (ULIP).
ULIP is a financial product that grants investors dual benefits of insurance and financial investment. This is done by dividing the premiums paid into two parts. The first part contributes towards providing life coverage, and the second part goes towards making investments in the money market instruments. Hence, many investors prefer placing their hard-earned money on such a plan to reap the many benefits that the best ULIP plan offers.ss
To further understand about best ULIP plans available in the market and the primary reasons to purchase one, here’s what you need to know.
Types of ULIP Funds
- Bond funds- In this case, the money is invested in bonds like government bonds, corporate bonds, or fixed-income bonds, to name a few. Bond funds come with medium risk with low or medium returns.
- Equity funds- Also known as growth funds, in equity funds money is invested in shares/stocks of a company.
- Cash funds- If you are someone who does not like taking too much of a risk, then cash funds is where you should invest. In case of cash funds, your savings are invested in money market instruments like bank accounts and cash deposits.
- Balanced funds- These funds are a combination of debt and equity funds. This means that the money invested is equally distributed and allocated to equities and other high-risk instruments while the rest is directed towards fixed interest tools which are low-risk in nature.
Why Say Yes to ULIPs
While the main reason for investing in ULIP plans is that they offer financial security and high returns, yet, there is more than just what meets the eye. To understand better what these benefits are here is a list below.
1. Multiple Fund Options:
ULIP plans give investors numerous funds to invest in like debt, equity, and balanced funds, which one can choose based on their risk appetite. Hence, if you are well aware of the workings of the financial market, you can choose to invest in high-risk equity funds.
Otherwise, you can go for balanced or debt funds which come with low to moderate risks. Another advantage of ULIP plans is that insurers like Max Life Insurance offer investors the option to switch between the funds on the basis of market conditions. This gives investors the chance to reap higher returns on their investment.
2. Financial Security in Case of Untoward Event like Death
In ULIPS, the nominee receives death benefits in case of a sudden or unfortunate death of the policyholder. This saves family members from facing any financial difficulties, especially if the policyholder is the breadwinner. The life cover in ULIP assures the beneficiaries that they will be financially secure, even in the absence of the insured.
3. Higher Returns
Another great advantage of investing in a ULIP plan is the long-term benefits that come along with it. You may pay premiums for a greater time horizon and enjoy the benefit of compounding by investing in the market for a longer tenure to receive higher returns. The accumulated amount may be used to meet specific goals such as your children’s educational expenses, down payment for a home loan, or retirement planning.
4. Tax Benefits
ULIP tax benefits help you to reduce your tax liability. Premiums paid towards ULIPs provide ULIP tax benefits under Section 80C of the IT Act, 1961. Besides, the death benefit and maturity benefits paid under such a scheme are completely tax-free.
With numerous options available in the market, it can be a tiring task to select the right instrument. However, having the best ULIP plan as part of your investment portfolio will offer you a striking balance between providing insurance cover and maximizing your returns. It is indeed a one-stop option for your family’s financial security and your long-term financial goals.