Unit-Linked Insurance Plan (ULIPs)
In all the above plans you don't have any option to select where you want to invest your money. For securing your capital most of these plans invest in debts, whereas Unit-linked insurance plan (ULIP) provides complete authority to you in choosing the best way to invest your money which you can invest in debt and equity as well. If you want to switch the current investment method, then you can do the same easily. Those who have good knowledge about the stock market can understand this easily.
ULIPs is basically a financial tool that offers insurance cover and allow you take advanatge of wealth creation.The double benefit of protection combined with freedom to choose your investment avenue makes ULIPs a truly popular financial instrument among customers.
Why you Should Buy ULIPs
A ULIP provides investors with a number of advantages, which are listed below:
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Flexible: ULIPs come out with the option of switching funds as per your choice. Investors has the option of investing their hard earned money in equity or debt funds that completely depend upon your risk appetite and market situations.
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Risk appetite: It allows the investors to choose among different available options as per their risk appetite. Those investors who do not want to invest big or don't want to carry any risk associated with market should go for debt funds and those who are willing to take a higher risk can opt for equity funds.
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Tax benefits: Like other insurance products, it also come along with the option of tax benefits. However this tax benefit that directly linked to the form of ULIP invested, as equity funds could be taxed 15% under certain conditions.
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Low charges: ULIPs do not have high charges associated with them. IRDA has put the limits on annual charge on ULIPs at 2-2.25% p.a. for the initial 10 years, with the charges on par with those of mutual funds.
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Long term investment: ULIPs are a long term investment option that occur because of increased lock-in period that also reap bigger returns.
How Do ULIPs Work?
A ULIP or a Unit Linked Insurance Plan is a financial s a financial tool tat offers the needful risk cover as well as investment options for the insured. ULIPs also allow customers to invest in stocks, bonds or mutual funds. The insured can choose the investment type based on his risk appetite as all option guarantee returns.
Initially, ULIPs was not an ideal tool as it didnt offer assure retursn and primarily focus on long term wealth generation product. Nowadays, however, almost all ULIPs offer investors assured returns of double or more their initial investment.
When someone invest money in ULIPs, the insurance company divides the amount between equity markets (shares, bonds etc.) and online life insurance plans.
The investments are managed by fund managers from the insurance company, taking away the need to track the investments.
ULIPs allow the investors to invest in multiple options, ranging from low-risk to high-risk as the case may be.
ULIPs also allow the policyholder to switch between their investments, allowing them to maximise their gains when market conditions are conducive.
Features/Benefits of ULIP
ULIPs offer incredible features and benefits to customers and hence are great investment tools especially in today's fast-paced world where returns matter as much as security. Here are a few highlighting features of unit linked insurance plans that make these instruments stand out among a host of investment options.
Flexibility: ULIP schemes offer flexibility that is not just applicable to one aspect of the policy but is comprehensive in nature.