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Today, more than ever, people have realised the fragility of life. Consequently, it has highlighted the importance of having a secure investment such as an insurance plan in their financial portfolio. Insurance policies act as reliable financial security during uncertain times. However, a major reason why people do not prefer investing in insurance is that they do not offer any investment returns.
But with insurance policies, like ULIP plans, this disadvantage of insurance policies is taken care of. ULIP policy gives you the dual benefit of insurance and investment. A part of the premium you pay for your ULIP plan is invested in the market, whereas the other premiums are used to provide you with a secure insurance cover so that your family is safe in the case of an unfortunate event.
Over the years, the popularity of a Unit Linked Insurance Plan or ULIP plan has grown manifold. This is primarily because good ULIP plans give you triple investing advantages - tax*-free premiums, tax-free growth, and tax*-free benefits.
The tax* advantages, high returns on investment and affordable investment costs make ULIP plans one of the most beneficial investments for all investors – risk-takers or risk-averse. Moreover, the benefits of ULIP enable you to take home a higher salary by allowing you to save taxes* and increase your disposable income.
Low investment cost: ULIP plans are structured to offer you two advantages of insurance and investment. The insurance cover helps to create a financial shield for your family in case of your untimely demise during the policy tenure. On the other hand, the investment component enables you to benefit from the market-linked returns and build your wealth over time and fulfil your financial goals.
In a ULIP plan, you pay one premium and buy two products packaged in one. Hence, you are not paying separately. Given the uncertainty of life today, investing in insurance is a need and not a choice. Inversely, having a financial portfolio aligned with your risk appetite is also the need of the hour. If not for the ULIP policy, you would be investing separately to get a life insurance policy and earn interest on your investments. This would be more expensive than paying premiums for the ULIP policy.
Hence, ULIP plans prove more cost-effective than two separate plans, which are a need today. By investing in a ULIP plan, you increase your take-home salary as you only invest in one plan instead of opting for two separate ones and paying extra premiums.
Return on investments: The main objective of investing is to generate returns to fulfil your financial goals and create a financially secure future for your family. The best way to do this is by investing smartly in plans that are aligned with your goals and risk tolerance and yet provide you with high returns.
One such investment is a ULIP policy. When you invest in ULIP, a part of your premiums is invested in market-linked funds as per your risk tolerance and financial objectives. So, if you are a high-risk taker and wish to accumulate a significant corpus for the long term, ULIP policy gives you the advantage to invest in equity-linked funds that offer high returns.
However, if you wish to change your portfolio, you can do so by using the switch fund option. Some companies might require you to pay ULIP plan charges for making the fund switch. If you are approaching your retirement, you can choose to change your portfolio to include debt-based funds. This means that the return on your investment is aligned as per your requirement.
Moreover, in ULIP plans, the amount you invest grows tax*-free until withdrawn. ULIP gains over Rs. 1 lakh are free from capital gain tax* if the policy is purchased before 1st February 2021 and the total annual premium is less than Rs 2.5 lakhs. So, you have the chance to build your wealth as you earn on your investments, which typically increases your take-home salary by a significant margin.
This is in contrast to other investment options, like a PPF (Public Provident Fund), a traditional insurance plan, etc. These plans offer no or low returns with limited opportunity to grow your wealth over time. Further, the ULIP plan allows you to top up your existing policy and add any amount at any time to grow your wealth. Good ULIP plans offer the most competitive returns on investment, which is a great way to increase your take-home salary.
*Tax savings: Apart from offering both advantages of investment and insurance combined in one product, you also get a lot of ULIP deductions under income tax laws. ULIP plans give you significant tax benefits that consequently increase your take-home salary. The premiums you pay for your ULIP policy are exempt from taxes under Section 80C of the Income Tax Act, 1961.
Apart from offering this ULIP deduction under income tax, you also get tax exemptions on the death benefit and maturity amount received. The death benefit received by your family is free from taxes under Section 10(10D). Maturity benefits for ULIP policies with premiums less than Rs. 2.5 lakhs are also exempt from taxes under Section 10(10D).
Moreover, all the capital gains for policies where the annual premiums are below Rs. 2.5 lakh premium threshold, there is no capital gains tax. This means that by investing in the ULIP plan, you get significant tax savings in the present as well as in the future. This helps to raise your disposable income, which means you can take home a much greater sum of your salary.
These benefits of ULIP make ULIP plans one of the most coveted investments in the present time. Good ULIP plans act as your reliable financial asset, enabling you to accumulate a large corpus over time by increasing your take-home salary and giving you significant tax* benefits.
You can consider investing in the Tata AIA policy that offers comprehensive insurance, competitive returns, flexibility in features with no ULIP plan charges for switching your funds. You also get all available ULIP deduction under income tax* laws, ultimately increasing your take-home salary.
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The products are underwritten by Tata AIA Life Insurance Company Ltd.
The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
*Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER
THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.
Past performance is not indicative of future performance.
All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.
Please make your own independent decision after consulting your financial or other professional advisor.