The Unit-linked insurance plan (ULIP) is a fantastic financial tool. It gives the benefits of both insurance and wealth creation through investment. Through life insurance benefits, it supports the policyholder to secure the family’s future. The plan does not drain the user out of money unnecessarily, although it may involve some charges.
How does it work?
When you purchase a ULIP, the premium is split into two sections. One part provides life insurance coverage, and the other is invested in various market-linked funds, such as debt, hybrid, or equity funds. Select a suitable investment fund based on your risk tolerance, financial goals, and investment parameters. Depending on the market performance of your chosen fund, the value of your Unit Linked Insurance Plan (ULIP) grows.
For example, a policyholder purchased a 30-year term plan when he was 30 years old with a life cover of ₹1 crore. In addition to this, he invested in an equity fund through ULIP. From this, two scenarios are considered. If the policyholder passes away at the age of 45 because of an accident, then his family will receive a payout. This could be either the fund value or the sum assured of ₹1 crore, whichever is higher, as per the plan’s terms and conditions. Some ULIPs may also offer the sum assured plus fund value on death.
The plan ensures that his family gets the financial support available under the plan. In scenario 2, the policyholder survives the whole 30-year tenure. He will receive the accumulated fund value based on his invested equity fund performance. This money will assist the policyholder in fulfilling his financial goals, like retirement, purchasing a house or any other expenses. So, either way, you are secured financially no matter what happens. This makes the policy invaluable for your portfolio, particularly in today’s uncertain times.
Life insurance security
In addition to investment benefits, the scheme also offers life insurance coverage. So if the policyholder dies during the tenure, the nominee will receive either the fund value or sum assured, or both. It depends on the plan. This way, the family will be financially secure. The plan makes ULIPs a more comprehensive option for those seeking both protection and market-linked growth, unlike mutual funds that do not offer insurance..
Tax benefits
This plan offers attractive tax benefits under the Income Tax Act. Premium payments made toward ULIPs are eligible for deduction under Section 80C up to ₹1.5 lakh per year. In addition to this, maturity proceeds may be tax-free, under Section 10(10D).
Long-term financial benefit
ULIPs are a great option for long-term financial returns with their compulsory lock-in period of 5 years. They encourage disciplined savings and help control impulsiveness. Also, your investment gets time to grow and benefit from compounding and market upturns.
Lastly, this can be said that ULIPs function as a dual-purpose financial tool. They encourage systematic investment by providing transparency, tax efficiency, and flexibility to secure your family’s future while you grow wealth simultaneously. Hence, compare available options and choose the right one for your portfolio right away.
