4 reasons why ULIPs are one of the best investment options in India
You have a busy work life dotted with meetings and hot pursuit of business targets. With an equally hectic personal life and little time left for rest and recreation, how do you ensure satisfactory progress towards your life goals like purchasing a new house, new car or your child’s higher education? Since you need ample savings, you will need to invest regularly for a long period of time. The question then arises, how do you choose the ideal investment plan which offers high returns that will take you closer to your life goals?
We recommend unit linked investment plans (ULIP) and thereby we will tell you why it is one of the best investment options available in the market.
Why opt for ULIPs?
ULIPs combine life insurance and investments to meet the life goals. ULIPs help establish a disciplined investment approach. This is where ULIPs, which have long term growth potential, come in handy. It also makes them one of the most sought-after investment options amongst those available in the market. Below are some of the key benefits which you can enjoy with a ULIP.
- Balancing your risk
Depending on your risk appetite, in a ULIP you can choose among various fund options like equity, debt and balanced funds to diversify your risk. Thanks to the potential of Equity market, investing in equity funds over long term allows you to get higher returns ensuring ample future savings. Here’s an illustration from Bajaj Allianz Life Goal Assure a ULIP that can be earmarked for any life goal.
Example: Sharman, a 25 year old investor is looking to invest so that he can start his dream project in about 15 years. So he invests Rs 50,000 annually for 15 years in a fund of his choice. At the end of term he gets INR 12, 51,187or INR 8, 97,478, if the money grows annually at 8% and 4%, respectively.
Therefore, if you want to build wealth to meet specific long-term financial goals such as children’s education, their wedding, and your retirement, these plans are ideal.
ULIPs provide flexibility in terms of switching between different funds without any tax liability. As you progress in life there may be changes in your investment goals and the flexibility to switch, allow you to choose instruments that suits your current financial objectives. ULIPs allow you to switch from one fund to another without any charges. In case you wish to switch to any other fund available in the product say from equity to debt or balanced or vis-a-vis the same can be done at your convenience.
- Avail tax benefits
It is not enough for investments to grow only, there is also a need for protection from the excessive impact of income tax. The rewarding aspect of ULIP is that they help you on both counts.
ULIPs are eligible for tax deductions under Section 80C & its proceeds are tax free under Section 10(10D) of the Income Tax Act 1961, subject to fulfillment of conditions mentioned therein.
- Rewards for staying invested for long
ULIPs are long term investment options. The new-age Ulip, Bajaj Allianz Life Goal Assure introduced two game changing features. First, the Return of Life Cover Charges, which guarantees that a policyholder will get back the cost of the life cover deducted during the policy term, at maturity, thus enhancing the value of corpus on maturity. Second is the Return Enhancer where, customers who opt to receive the maturity benefit in instalments (and not lump-sum) over a period of five years are entitled to this benefit. Here they get an additional 0.5% hike-up on each instalment. It also offers Fund Boosters for policy term 10 years or greater and Loyalty Additions for Annualized Premium of INR 5 Lakhs or more & for policy term 10 years or great for paying premium regularly and staying invested for the term chosen.
Undoubtedly, with its combined benefits of wealth creation, strategic flexibility, and tax savings, ULIPs are one of the best investment options that help in meeting current and future needs of the customers.