It is crucial to have a financial plan that can safeguard you financially and your family in the sad case of your absence in these uncertain times of a global epidemic. The former can be accomplished by concentrating on long-term wealth growth, while the latter can be resolved by acquiring a life insurance policy.
Unit-Linked Insurance Plans, or ULIPs, are a single investment vehicle that can help investors attain both objectives.
An investment product called a ULIP aims to satisfy both investment and insurance demands. The policyholder’s choice of investment funds, which may span numerous asset classes, is made with the policy premium. Under Sections 80C and 80 CCD of the Income Tax Act, this popular long-term financial planning product also offers significant tax advantages. The maturity proceeds or the amount assured for plans with a premium up to Rs 2.5 lakh are tax-free under section 80 CCD, as per the new tax regime. Unlike other financial products subject to a capital gains tax, intra-fund swaps in ULIPs are tax-free. To better understand the plan, you can check the ULIP calculator and learn more.
Keep the following in consideration before making a ULIP investment:
Choose the highest amount assured.
The lump-sum amount promised to the policyholder’s nominee in the event of the latter’s passing while the ULIP is in effect, is known as the sum assured and is disclosed at the time of purchase. It is advisable to choose a significant quantity assured because this cash would be used to care for the family in the terrible event of the policyholder’s passing. As they provide the benefit of the return of mortality premium in the unfortunate event of the policyholder’s untimely demise, ULIP plans with a return of charge are to be selected.
Additional fees applied
Policy administration fees, premium distribution fees, fund management fees, top-up fees, mortality fees, switching fees, rider fees, premium discontinuance fees, etc., are some typical ULIP fees. Not all insurance companies impose these fees; some even refund the sum under each heading. Make sure you know the many fees charged before approaching an insurance company. Before purchasing the ULIP Policy Plan, a policyholder should understand the full scope of charges and how they may affect possible returns. Modern ULIPs have significantly lower fees.
Credibility & solvency of the insurer
Before making a purchasing decision for a ULIP, it is crucial to research the legitimacy and reputation of the insurance provider because they are long-term investments. Insurance companies are subject to strict regulation, and the regulator ensures that all businesses adhere to the requirements for solvency. The solvency ratio, which assesses a company’s ability to pay down long-term debt, is a reliable sign of how financially stable an insurer is.
Adjust your asset allocation to reflect your risk tolerance and objectives.
Based on the policyholder’s risk profile, one should choose the asset allocation for the ULIP policy. Debt funds are a good option for risk-averse policyholders, while stocks are better for adventurous investors. Investing in a fund that provides a hybrid opportunity is another way to take a more balanced approach (i.e. a mix of equities and debt). Check out the ULIP calculator to understand clearly.
Carefully compare and select items.
Make sure you evaluate all the options on the market and compare features before purchasing a ULIP plan. Examine the underlying funds of the products, paying particular attention to their goals and historical results. But remember that a fund’s past performance does not guarantee its future success.
The market’s selection of ULIP plans might be a terrific way to meet your insurance and financial needs and advance your objectives. Additionally, these plans provide prospects for tax reduction, various investment portfolio techniques, and flexible asset allocation alternatives. To make a wise choice, fully understand all the ULIP tax benefits before buying a ULIP.
Particularly for young Indians in their 20s and 30s, ULIP plans have long been the preferred investment choice. They offer numerous alternatives for risk and return and are easy to use and understand. By encouraging them to save and making them aware of their spending patterns, investors claim that their ULIP coverage benefits them in the long run. Additionally, the policy produces consistent returns, which is particularly advantageous for young individuals starting. Remember to read more about the plans and ULIP tax benefits before choosing your plans.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.