Unit-Linked Insurance Plans enable you to achieve long-term life goals that most individuals save up for. Be it your marriage, retirement planning, or purchasing a house, ULIPs help you earn that much returns from your investment. The premium you pay gets invested into multiple ULIP funds. However, as an investor, it is good to know how much you can gain from the ULIP policy and what makes it better than other financial instruments. To find out, continue reading below:
Returns You Can Expect from ULIPs
ULIPs are a market-linked investment tool that allows you to earn lucrative returns based on your risk appetite. Such an insurance plus investment plan has a mandatory lock-in period of 5 years during which you cannot make any withdrawal. Though this period may seem long, many investors tend to exit the policy right after the lock-in period gets completed. To gain higher returns from your investment, it is advised to stay invested in ULIP for the long term.
Such a financial instrument can generate good ULIP returns in 10 years. One reason for this is, the impact of several charges applicable to your premium gets lower. Thus, more of your premium will be available for investment as time goes by. Another reason to consider is the market-linked aspect of ULIPs. If you were to take high risk and opt for an equity fund, then you must choose to stay invested longer. As the market is highly volatile, you won’t earn much if you discontinue the policy early. Therefore, the ULIP plan can offer you high returns with long-term investment.
Features That Make ULIP the Best Investment
Here are some key features offered by a ULIP policy that make it the most suitable investment option:
- Tax benefits
With ULIP, you can claim benefits on three components, namely, the premium, the death benefit, and the maturity payout. The premium you pay towards the insurance plan can be claimed as a deduction under Section 80C of the Income Tax Act. A maximum amount of INR 1.5 Lakh is allowed per year. The death and maturity payout can be claimed as tax-free under Section 10(10D) of the Income Tax Act. But for newer ULIP plans, the annual premium should be less than INR 2.5 Lakh to enjoy tax perks on the maturity payout.
- Top-up premium facility
To earn better returns from your ULIP insurance plan, you can opt for the top-up premium facility. It enables you to pay a surplus amount towards your policy over and above the regular premium. With this additional sum, you can increase your sum assured amount or invest it towards your ULIP fund. You can make use of this facility anytime during the policy tenure if you have been paying your premiums regularly. Therefore, such a facility allows you to gain more profit from your investment.
- Fund switch option
The option to switch funds is a lucrative feature available under the ULIP policy. In case you take on high risk by investing in an equity fund but later want lower risk exposure, then ULIPs have got your back. The insurance provider offers some free fund switches to you, but later, a fee is levied for using this facility. Thus, you must make the most of such a beneficial feature. Check out the ULIP calculator to estimate how much return you can earn with your insurance plan!
- Life cover plus wealth creation
ULIPs are unique plans that give a dual advantage to policyholders to fulfill various goals. Having a risk cover from untoward incidents is a must these days. But you also need to save up for your future. So, instead of choosing two different financial tools, you can opt for Unit-Linked Insurance Plans to satisfy both the requirements.
With this, you must have learned how ULIP offers you good returns with its investment component in the long term. So, determine how much you can earn with a ULIP calculator and purchase an insurance plan today! Make sure to compare various insurance providers and the plan they offer before choosing a suitable one. This can help you pick the best ULIP plan that meets your insurance needs.