Some years ago, insurance was all about creating a ‘safety net’ for loved ones that provides financial assistance in case of uncertain events. While the core objective of insurance plans still remains the same, many plans have evolved to provide a solution that combines insurance with investment. An example of such plans is Unit Linked Insurance Plans, or ULIPs, as they are popularly known.
Delving a little deeper
ULIP, in simple terms, is a plan that combines two components: insurance and investment. When you invest in a ULIP, part of your premium goes towards providing life cover, and the remaining amount is invested in market linked investment options like mutual funds.
ULIPs also allow you to choose the type of funds your money will be invested in. The amount of returns you will get depends on the performance of the fund you have selected. Moreover, most ULIPs allow you to switch funds from time to time, according to your needs.
You can choose to pay the premium in a single lump sum amount, or break it up into smaller parts and pay annually, half-yearly, quarterly or monthly premiums, based on your convenience.
Why invest in ULIPs?
Some of the major advantages of investing in ULIPs are:
- It combines insurance and investment in one single product
- You can change your investment component according to your life stage by switching from one fund to another
- ULIP investments of up to Rs 1,00,000 are deductable from your taxable income under Section 80(C) of the Income Tax Act, 1961
- You can use ULIPs for long-term financial planning and meet major expenses like marriage, child’s education, retirement, etc. with ease
If you are looking for one single solution that can meet your long term and short term needs, ULIPs are an excellent option.