Road to your Life Goals gets clearer after Budget 2018

7th February 2018

Investments in infrastructure and agriculture, proposals to substantially increase rural income, mostly untouched personal income tax, Budget 2018 has clearly paved the way for higher economic growth. For an investor, this means great opportunities in equity investments. After all, good economic growth goes hand in hand with brisk growth for equities.

For major life goals be it child’s higher education or retirement, equity investments have been established as the best investment route. This is because they typically provide high growth in the long term i.e. 8-10 years, or more.

Individual investors typically lack the expertise and time to monitor their investment in individual stocks. That’s why they need to rely on equity-oriented products unit linked insurance plans (ULIP). Thanks to the many equity investment friendly proposals of Budget 2018, the advantages provided by ULIPs in the past, will now get bolstered even further.

  1. As some of us know, ULIPs invest money from investors in equities. However, they also provide life insurance protection. All ULIPs provide tax deduction of up to Rs 1.5 lakh annually under Section 80C. Of course, the same tax deduction is provided by other tax saving investments be it Small Savings Schemes like Public Provident Fund (PPF), bank fixed deposits or eligible mutual funds. That’s not all.
  2. Maturity proceeds from ULIPs is tax-exempt under Section 10(10) D, if insurance cover is more than 10x of premium. This advantage remains as before. It is important for investors, especially those making tax saving investments, to consider this aspect. It makes a major difference to the amount that stays in your hand to spend for any life goal like children’s higher education. Remember, not all equity oriented tax saving investments provide this benefit.

The ULIP Edge after Budget 2018

Challenge of investors’ equity fund selection: Many experts argue that it is prudent for investors to keep their life insurance protection and investment separate. They advocate buying of pure life protection, term insurance plans, with investments in equity funds made to achieve life goals. Unfortunately, this approach overlooks the typical investor problem. How does he or she choose the right equity funds among the plethora of equity funds?

ULIP’s long term nature:

It is in this backdrop, the investors are likely to increasingly find ULIPs more attractive. A five-year lock-in ensures that investors stay invested. The life insurance component ensures that you have one more reason to adhere to the financial discipline of paying regular premium. This is great for those who struggle to regularly invest by themselves.

In many ULIPs, you also get rewarded for staying invested. You are provided with loyalty additions. They are paid when you stay invested for a minimum period of time, say 10 years, and then receive them in regular intervals, say, every five years. The payments, a percentage of your life insurance amount, get added to your final savings amount. You get no such reward as an investor in alternatives to ULIPs such as equity mutual funds, especially tax saving equity funds.

ULIPs typically provide you with a choice of funds like large-cap equity, mid-cap equity, debt, liquid and asset allocation. You can choose a fund according to factors like your risk profile. Proper asset allocation and wealth tracking ensures ULIPs help you stay on course for your life goals. As you near the life goal for which you had bought the ULIP for, you need to secure the gains made over time. You need to move the money into lower risk investment avenues like debt and liquid funds to protect your downside risk. Thanks to the switching facility in ULIPs, you can make the switches free of cost and without paying any tax on the gains made.

ULIP Advantage with Bajaj Allianz Life:

To get the ULIP advantage, look no further than ULIPs from Bajaj Allianz Life Insurance Company like Bajaj Allianz Life Future Gain and Bajaj Allianz Life Wealth Gain. The investment management expertise combined with tax benefits will help you to meet your life goals. Last but not the least, with ULIPs, long term capital gains remain with you, as they should, even as you pull out all stops in pursuit of your life goals.



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