10 Factors To Look At Before Investing In ULIPs
The top 10 things to know before investing in ULIPs are listed below:
1. ULIP plans have flexible investment options
ULIP policyholders have the flexibility to invest their premium in a variety of options, including equity, debt, or a combination of the two, based on their risk tolerance. While someone who is more careful can invest in mutual funds, someone who doesn’t mind significant risk can choose ULIP investment possibilities in equities funds.
2. ULIPs come with a top-up option
Under certain circumstances, ULIP policyholders have the option to adjust their premium payments and are not obligated to maintain a fixed amount of contributions. Investors with ULIP plans have the option to “top up” or add more money to their initial ULIP investment at any time.
3. Transaction fees are not included in more recent ULIP plans
ULIP plans offer a prudent and secure means to begin investing. Nevertheless, there are several transaction fees related to fund management and premium allocation for older plans. Before investing, it is recommended to ensure that the policy is recent and that these fees are eliminated after a few years.
4. Section 80C allows for tax deductions for ULIP plans
Investing in a ULIP policy is tax-deductible under Section 80C of the Income Tax Act of 1961. As a result, premiums up to Rs 1.5 lakh are exempt from taxation for investors, making ULIP plans an attractive investment choice for beginners. Additionally, Section 10 (10D) of the Income Tax Act of 1961 permits the final sum to remain tax-free even after the policy matures.*Both a new and an old tax system are now in place in India. Choose the right expert once you’ve gotten in touch with one to get the desired tax benefit. You have the option of changing the regime for the upcoming fiscal year.
5. Lock-in time guarantees discipline
ULIP policies usually have a lock-in period of five years, during which investors are required to continue paying premiums. It is advisable for investors to consistently save and enhance their savings during this time. After the lock-in period, investors have the choice to discontinue their ULIP plan or withdraw a portion of their funds if they wish to do so.
6. ULIPs are reliable investments.
Despite transaction fees and lock-in periods, ULIP insurance is a well-liked investment for the long haul. They force investors to be more disciplined while simultaneously boosting wealth because they require frequent payments to be active. The lock-in period encourages investors to hold onto their funds and ride out market swings while earning significant gains. A ULIP plan also enables investors to mix and match assets to create a broad portfolio. With the help of a ULIP calculator, you may be able to get an estimate of the returns you are likely to earn on the funds you have invested in.
7. Different premium payment methods
ULIP insurance is renowned for its flexibility, which extends to the way payments are made. When it comes to paying premiums, investors have three options: a single premium plan, where the entire ULIP investment is made in one go; a regular premium plan, where a set amount can be deposited for the life of the ULIP policy; and a limited premium plan, where the amount is paid over a set period.
8. There is potential for large returns with ULIP policies
The fact that the return on ULIP investment has the potential to be quite high – even in double digits – is one of their strongest features. Investors can reap significant benefits by investing their premiums intelligently across a diverse range of assets and tax-efficient funds.
9. Dates of maturity may be deferred
Some ULIP plans permit the investor to push back the maturity date, which delays the time when the policy matures, and the funds can be taken in full. The key advantage of a policy that permits maturity date extensions is that an investor can reduce risk if the date coincides with a market dip or decrease. The investor will ultimately receive larger gains if the ULIP policy matures at the same time as the markets strengthen.
10. ULIP policies help family planning
In the event of an unforeseen death, the investor’s family can depend on ULIP plans to attain financial stability. Additionally, ULIP plans prove beneficial for emergency, retirement, and education planning purposes.
ULIP plans have been a popular investment choice among young Indians for quite some time now. These plans provide a variety of options for risk and return and are easy to understand. Investors believe that by opting for ULIP coverage, they are encouraged to save and become more mindful of their spending habits, resulting in long-term benefits. Furthermore, the policy’s consistent returns are especially beneficial for young individuals who are just beginning to invest.