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Financial planning is a prerequisite to the fulfilment of future goals. Be it your child’s education or buying a home, it is necessary to save and plan your finances so you can accomplish your dreams. Investment is a crucial aspect of financial planning. Nowadays, people resort to the internet to find tax-saving* investment options or take advice from family and friends to get started. If you are one of them, you might have come across the term ULIP plan, among other suggestions.
A ULIP scheme has been long considered a great investment option to save up for your dreams. And, not without merit! There are several benefits of ULIP investment that make it popular among most people. Let’s look at ULIP in detail to understand why you must include it in your investment portfolio.
Insurance is not limited to securing your loved ones’ life post your demise. But, it goes beyond that. As the product evolved and people’s need for saving instruments increased, wealth creation element was added to insurance resulting in varied insurance investment products.
A Unit Linked Insurance Plan or ULIP is one such offering. It is a type of life insurance that comes with a savings component. When you purchase a ULIP policy, a part of the premium you pay for it goes toward the life coverage, and the other portion is invested in market-linked securities.
Moreover, it comes with rider# options that allow you to solidify your family’s financial safety. The investment factor helps you provide for future needs like a child’s education, marriage, building a home, retirement, etc.
Apart from these, there are several other features, such as the tax-saving* aspect, that make a ULIP scheme an ideal investment option.
By now, you might have developed a basic understanding of a ULIP plan and its working. Let’s delve deeper into its features to comprehend why it is a great investment option for you.
1. Choice of Investment Funds
You want to make sure you save a substantial amount of money for fulfilling your goals or any immediate requirements in the future. Whether your goal is retirement or buying a home, you want to have fund options that allow you to gain considerable returns and take minimal risk where necessary.
ULIP investment provides you with a choice of funds ranging from equity and debt to liquid and index funds. You have the flexibility to scatter your money across different instruments to make the best of your investment. For instance, you can allocate some amount to equity funds for goals with a long-term horizon. For short-term goals, you can either opt for debt or liquid instruments.
2. Tax-Saving* Investment
One of the major benefits of ULIP investment includes the tax-saving nature of this type of investment. ULIPs carry the triple E or EEE tag, which stands for Exempt-Exempt-Exempt, which helps you save tax on ULIP premiums, returns and death payout.
As a ULIP policyholder, you can reap the advantage of claiming tax benefits during all three stages of investment, return, and withdrawal. You can claim deductions on the premium paid. Furthermore, you have the option to withdraw your investments post the lock-in period. The returns, maturity payouts and the death benefit are exempt from taxation under Section 10(10D), subject to specific guidelines.
Budget 2021 announced changes in the taxation guidelines for the ULIP maturity benefit. For ULIPs bought on or after 1st February 2021, the maturity returns will be considered as capital gains and taxed accordingly if the total annual premiums paid exceed Rs. 2.5 lakhs. For older policies and policies with total premiums below Rs 2.5 lakhs, the maturity payouts will remain tax-free.
3. Insurance cum Investment
This one is a no brainer! A ULIP policy provides you with the dual benefits of insurance and investment.
The policy comes with a life cover that takes care of your family’s financial wellbeing in your absence. In addition to this, it provides riders# to improve the cover.
TATA AIA ULIP schemes provide the two options of waiver of premium rider#. This enables your dependents, especially young kids, to remain covered without having to bear the burden of premium payment when you are no longer around.
As mentioned before, a part of your premium is invested in market-linked funds. Say, for instance, you have begun your career and want to save some portion of your income for fulfilling goals in the future. You can invest in ULIP and gain considerable returns over a time period. At the same time, you enjoy financial security.
One of the best parts of investing in a ULIP plan is transparency, i.e. you know where your money goes and how much! Typically, ULIPs carry some charges, which include administration, premium allocation, fund management, surrender, and mortality charge. You know the amount that goes in this, along with the status of your investment from end to end. Plus, you don’t need to worry about these charges, as in the long run, they reduce, letting you enjoy better returns.
5. Portfolio Management
Not happy with the performance of the fund you chose? Are the market conditions calling for a shift in your portfolio of investment?
Apart from the freedom to select the funds you wish to invest in, ULIP investment also lets you rearrange your portfolio as and when required. You can take advantage of market fluctuations or shuffle the money in securities to facilitate life’s changing circumstances, thus ensuring optimal returns.
For example, you can check your Tata AIA policy status online and manage it anytime!
6. Long-Term Investment Tool
Most people have dreams for which they work hard to accumulate wealth. For instance, you may want to buy a bigger home or start a new business a few years down the line. This requires consistent investment to ensure a sufficient amount is gathered within the timeline.
A ULIP policy has a 5-year lock-in period, post which you can withdraw if you wish to. This ensures discipline of investment to facilitate long-term objectives. As you can see, a ULIP scheme is an ideal choice for investment! If you haven’t considered it yet, you might want to buy one now.
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Insurance cover is available under the product.
The products are underwritten by Tata AIA Life Insurance Company Ltd.
The plans are not a guaranteed issuance plan, and they 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.
#Riders are not mandatory and are available for a nominal extra cost. For more details on the benefits, premiums and exclusions under the riders please refer to the Rider Brochure or contact our Insurance Advisor or visit our nearest branch office.
*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 for 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 THE 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 POLICYHOLDER 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 advisors.