Understand why ULIPs are affordable investment options

Unit-linked insurance plans are full-form ULIPs. With a ULIP plan, you can invest in your long-term goals and get a life insurance policy to protect your family financially in case of an unfortunate event. 

ULIPs combine insurance and investment. Besides offering a good return on investment, it also helps you save taxes. ULIP plans are one of the best investment options in the current market environment.

Top 8 reasons you should invest in ULIP:

  • Transparency

Before you purchase a policy, you are informed of the charge structure, investment value, and expected rate of return. Investing your hard-earned money into something you understand is always a good idea for ULIP plans. 

You will always be updated about your investment portfolio’s status with the annual account statement, quarterly portfolio, and daily Net Asset Value (NAV) reports. 

  • Setting a goal 

Savings is important for achieving your life goals like buying a home, funding your children’s education, and providing a comfortable retirement. A long-term systemic investment plan is one of the most effective ways to achieve this ULIP plan.

By helping you invest your money in a disciplined way, ULIPs help you meet key financial goals. Your long-term goals are at risk of being compromised to meet short-term needs without such an approach. 

  • Liquidity

ULIPs become liquid after the lock-in period of five years. The premiums are redeemed by redeeming the units in which they are invested. One can also surrender a policy at a loss if they withdraw prematurely. 

In an emergency, you will be prepared financially. The amount can also be withdrawn at various intervals according to your needs. As a result, it is advisable not to withdraw from your ULIP unless an emergency arises in order to achieve your long-term financial goals, such as your child’s education, buying a house, and more. 

  • Tax relaxation 

ULIP premiums can be deducted under Section 80C up to a maximum of Rs 1.5 lakhs per year. Additionally, the maturity amount you receive is tax-free under Section 10(10D)

  • Risk factors 

Due to the fact that ULIP investments are not as diversified as ELSS, the risk in ULIPs is probably higher than that of Equity Linked Savings Schemes (ELSS). The insurance cover would cease immediately if a ULIP is surrendered within the first three years. 

  • Flexibility 

Equity, debt, and balanced fund options are available in most ULIPs. Due to this, you can invest your money based on how much risk you’re willing to take and how much return you’re expecting.  A ULIP also gives you the option of moving your money between different funds so that you can earn the most return. 

  • Net Asset Value NAV

Maintain regular monitoring of your policy’s performance. The company publishes daily NAV reports to assist you in doing this. Units of a fund are purchased at NAV, which is the fund’s value. It gives you an indication of how your fund has performed when its NAV changes (increases or decreases). 

  • Affordability 

This is another major factor before investing in any ULIP plan, you should choose your plan wisely and look for affordable premiums for the long run.