7 reasons to invest in ULIPs for FY22-23

7 reasons to invest in ULIPs for FY22-23 1

In a day and age where the global economy has had a severe impact on the daily cost of living; the emphasis of saving money and growing it has never been higher. People have always invested in the markets. However, markets are always risky and not everyone can maintain their investment all the time.

There is one financial product that easily helps you manage your investment and protect your loved ones with life insurance. This product is known as a ULIP policy. What is this policy? Why should you invest in it for the financial year 2022-2022? Read on to know more.

in ULIPs

What is a ULIP?

A unit linked insurance plan is a type of life insurance policy. In a ULIP policy, you get to enjoy the benefits of investment and insurance under one policy. The premiums paid for this policy are used for both the purposes. Investment is done in equity and debt funds. Based on your risk appetite and requirements, you may choose to invest in either type of fund or in both. Insurance is provided to the family of the policyholder, wherein they get death benefits in the event of the policyholder’s untimely demise.

Why should you invest in a ULIP?

1. Choice of investment

As an investor, you have the option of going with equity funds or debt funds in ULIPs. When you opt for an equity fund, the money is invested in stocks of market-listed companies. This means the risk factor is higher due to the volatile nature of the equity market. However, the returns you get are also higher.

On the other hand, debt funds are an investment option with a lower risk factor. Money is invested in government bonds and securities, corporate bonds, and other types of liquid markets. This means that the risk is lower than an equity fund and the returns are also medium. Based on what your risk appetite is and what your life goals are, you can choose to invest in either type of fund. You also have the option of investing in both the funds to get substantial and consistent returns.

2. Life protection is provided

The other benefit in ULIPs that you can enjoy is the life insurance cover. A part of the premium is used for the provision of this cover. If the policyholder passes away suddenly during the term of the plan, the family of the policyholder will be provided with monetary assistance by the insurer. This is known as death benefit. This benefit helps your loved ones with all the necessary daily expenses without having to worry about financial instability.

3. Tax benefits to be enjoyed

Under Section 80C of the Indian Income Tax Act, tax deductions can be availed in ULIPs on the premiums you pay for the policy. Additionally, the maturity benefit under the policy is tax-free under Section 10(10D) of the Income Tax Act. If you opt for partial withdrawals, you can avail tax deductions under the conditions of Section 10(10D).

4. Switch as per your convenience

In ULIPs, you have the provision of switching your investment between funds. If you have invested in just equity funds; with the help of switching, you can reallocate all or a part of your investment towards debt funds. The same can be done if you have invested in just debt funds. Similarly, if you have invested in both the funds, you can reallocate the investment to maintain low risk and get continuous returns. This can benefit your greatly as it positively impacts the ULIP returns in 10 years or more than that.

5. Charges are minimal

There are different types of charges that are levied in ULIPs. These charges include administration fees, fund management charges, mortality fees and switching charge. Most of these charges are deducted during the lock-in period from the fund value. Compared to other financial instruments, ULIPs have a charge of only 1.35%.

6. Increase your investment

ULIPs have something known as a top-up premium. With the help of this premium, you can increase the amount of your existing investment. This helps you in getting more returns than that expected from your original investment. You can invest any amount as per your convenience with the help of the top-up premium.

7. Fulfil your life goals

ULIPs are a great instrument when it comes to achieving your life goals. Goals such as securing the future of your loved ones, buying a new home, or wanting to start a business, require a good amount of money. With ULIPs, you can easily do so as it provides the necessary financial assistance in accomplishing your life goals.

If you are pondering upon the question of where to invest, the benefits mentioned above should give you a better idea. Before you invest in ULIPs, use the ULIP calculator to see what kind of plan would suit you.

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