The income tax surely decreases the take-home salary amount. However, if you choose the right investment option then you can boost your overall savings, garner better returns and also meet your long-term financial goals.
ULIPs are a great mix of investment and insurance. The money is invested in the stock market through a mix of balanced, equity, and growth schemes. The return of investments depends on various different factors like the maturity period, lock-in period, rate-of-return etc. This is the reason why ULIPs offer a better return in long-term as compared to other investment options.
With many different benefits provided by ULIPs, here is a quick rundown of some of the reasons why ULIPs make a good long-term investment option.
- The Lock-in Period
ULIP plans come with a minimum lock-in period of 5 years. However, in order to gain maximum return on investment, it is advised to invest in ULIPs for a period of 10 years. ULIP plans help the investors to maintain a disciplined investment habit with a longer lock-in period. The lock-in period of the policy is computed from the date of policy initiation and the policyholder can choose to pay the premium either monthly or yearly. So, the mantra is to find the Best ULIP Plans online and keep the policy going to get the best returns out if it.
- Flexible Investment Option
ULIP plans offer flexibility to switch between funds as per one’s own choice and requirement. The investors have an option to choose between income, equity, growth, and balanced funds according to the risk appetite of the individual.
Different ULIP plans provide the different option of free switches and one can make up to a maximum of 4 free fund switches in a year. Moreover, one does not need to keep a track of fund performance as the investments are managed by expert fund managers. Once the policy tenure is completed the investment returns are offered to the individual as maturity benefit.
- ULIP Offers Higher Returns As Compared to Other Investment Options
As compared to other insurance products ULIPs offer a higher return on your investments. ULPS offer combined benefit of insurance and investment. Under ULIP plans, a part of the premium paid by the insurance holder is invested in various asset classes such as equity, debt, shares, etc.
With the advantage of free fund switches, the policyholder can not only create a financial cushion for future, but it can also provide financial security to their family as ULIP plans also offers the benefit of life cover.
- Double Benefit
Along with the benefit of investment return, ULIPs also offer tax saving benefits. The premium paid by the investor towards a ULIP offers tax-exemption benefits under Section 80C of the Income Tax Act. Furthermore, the returns that the investor gets on maturity offer tax exemption under Section 10(10D).
- Top-ups and Premiums
The ULIP plan offers monthly and annual options of premium payment. However, in order to gain maximum return over a long-term period, it is advised that the investors should choose the monthly option of premium payment by going with SIP mode. Moreover, if one wants to gain surplus benefit then they can choose the option of top-ups that can be availed by paying some extra amount.
- New-Age Ulips
With the growing popularity of ULIP plans, the IRDA (Insurance Regulatory and Development Authority of India) has introduced new guidelines of Unit Linked Insurance Plans making it more investor-friendly. As compared to before, now ULIP plans offer low allocation charge, administration cost, and fund management cost. The reduction in these costs has greatly influenced the overall cost of ULIP and successively increased the returns in a long-term period. However, before investing in ULIP it is very important to have proper knowledge of ULIP funds and how it works.
Not everyone wants to invest in a long-term investment option. However, if you are looking for investment and savings in one plan, then ULIPs are the right investment choice. With long term benefits, ULIPs offer maximum returns on investment and help to create a financial cushion over a course of time.
Here is a quick overview of the benefits offered by ULIP’s that makes them a profitable investment option
- ULIP plans provide flexibility to switch over funds
- ULIP plans are transparent in nature
- ULIPs offer great features at a minimum cost
- ULIP’s offer rider options
- Tax benefit under section 80C, 80D and 10D
With the benefit of a long lock-in period and insurance coverage, ULIP are not less than a wealth creation tool. One can get the best results if the lock-in period is for more than 10 years. As the money is invested in stock-markets the returns are subjected to market risks as well. It can be worth exploring if your risk profile meets the tradeoff.