Unit Linked Insurance Plans (ULIPs) are fast emerging as one of the most preferred choice of investment for people who have different kinds of life goals. Straight from youngsters who have just started their professional careers to older professionals who are nearing retirement, ULIPs continue to be a one of the preferred choice of investment instrument for all of them. The features of ULIPs are such that the benefits are numerous which ensures its evergreen popularity.
What is ULIP?
A ULIP provides life insurance protection along with wealth creation opportunity to achieve your life goals. You can switch between different kinds of ULIP funds based on your risk appetite.
Owing to this multifaceted nature, a ULIP is considered an investment opportunity that can help you get your life goals done. There are several other features of ULIPs, which make it an investment instrument for people of all ages. Read on below to learn more.
Top 5 Features of ULIP You Didn’t Know
1. Your ULIP investment can match your risk profile
Not everybody has the same risk profile, and not every investment instrument poses the same amount of risk. Equity instruments are usually considered to be riskiest investments owing to their complete reliance on market forces whereas debt securities are considered less risky. Instruments such as fixed deposits are considered even less risky owing to their stable rate of interest. However, the riskiness of the investment instrument is proportional to the returns you earn as well. For instance, your rate of return on an equity instrument is likely to be significantly higher than the interest you earn on a fixed deposit over long term.
Regardless of your individual risk profile, you can opt for a ULIP because it can be customised to align with your own risk profile. While making a ULIP investment, you will be asked about your risk profile at which point you can choose the funds you want to invest in.
2. ULIPs offer tax benefits
One of the features of ULIP lies in its enormous tax saving potential. Making a ULIP investment helps you save taxes in the following ways –
• ULIPs are eligible for tax deductions under section 80C while the maturity benefit or death benefit is tax-free under section 10(10D) of the Income Tax Act, 1961. Further, ULIPs have been kept exempt from LTCG tax. The tax benefits are subject to provisions of Income Tax Act, 1961, as amended from time to time.
• Apart from these, critical illness riders, top-ups and other additional coverage’s are a few of the other options available that make ULIP one of the preferred investment tool for someone who dreams big and invests in a disciplined manner to reach his financial goals in life.