Why Investing in a ULIP is Beneficial
Now an insurance plan is great when your goal is to just secure the financial future of your family or dependants but what if you could get more than just that? That’s right with the launch of ULIPs you can get a term insurance plan that will also work as a great investment plan you can reap benefits from. Let’s look into this in detail.
What are ULIP: ULIPs are investment plans that combine the benefits of investing money in the market with a life insurance plan. The premium a policyholder pays is usually divided into two parts; one part goes towards the life insurance coverage and the other towards market investments that you earn returns from. The longer you stay invested in a ULIP the more benefits you inherit. Just like insurance policies, there are a lot of different ULIPs available on the market that serve different financial purposes. So whether you want to take one out to secure your retirement or you want to save for your child’s education, there is a ULIP you can take to serve all those needs. So depending on your financial need or goal you can choose the right ULIP. Let’s look at the different ULIPs in detail.
ULIP for wealth creation: If your goal is to be in a better financial position in the future or create a better financial state for your family you can invest in equity-linked funds. Equity-linked ULIP usually invests in high-risk equities and because of that, the returns on this is also large. So if you feel lucky and live by the motor “fortune favours the bold” you can consider investing in this ULIP. If you want to play save you can invest in debt ULIP where the returns are usually between 8% – 9%. Either way, in the event of death, the beneficiaries will get the sum insured or the fund value, whichever is higher.
ULIP for securing your dependant’s future: When you think ULIP, think of it as a plan that will not only secure your financial future but also the financial future of your children or dependents. The earlier you start investing in a ULIP, the more returns you’ll get when the policy matures. If you take out a ULIP now for the next 20 years you would have been able to save enough money for your child education or marriage even if it got a minimum 8% return. There are many insurance providers that also provide smart investment benefits like annual income for the child expenses and plans where on the death of the policyholder, the premiums are paid by the insurance company.
ULIPs for Retirements: Saving for your retirement is great so that you don’t have to depend on your children for support when you grow old. And taking out a simple life insurance and a retirement plan may be too much of a hassle to maintain the two policies. ULIPs plans that cover inflation and also offer a good return is what you should consider. These plans work as financial aides and vary your investments between different levels of risk as you age. A key point to remember while taking out a ULIP that will benefit your retirement is to consider your monthly income now and take out a plan based on that. For Instant, if you are 30 and earn 35,000 now; assuming you retire at age 60 you will need a little more than that to survive every month after retirement. Hence you will need to invest in a plan that will create a value that will allow you to spend a little over 35,000 every month when you retire.
By taking out a ULIP you can benefit in many ways including getting tax benefits, life cover, and higher returns. So why just settle for a regular life insurance policy when you can take out a plan that works both as a live cover and investment plan. Plus ULIPs provide loyalty bonus to policyholders who stay invested for longer, giving you another reason to choose these over term insurance. One important thing to remember is not to use ULIPs as a fast car to gain wealth but as a mechanism to future proof your financial goals.