How Life Insurance Shields Your Wealth?
You might have a steady source of income or a profitable business that enables you to support your family's needs and achieve your financial goals. However, given the steeply rising inflation rate and the ever-growing medical needs, your current savings might not be sufficient to protect your goals or your family in the future. As a wise and responsible planner, you should invest wisely to protect your wealth and grow it over time. For this purpose, you can choose investments like a life insurance policy that provides you dual benefits of insurance and investment.
However, if you think insurance covers are not worth the savings, you are far from correct. You need to think again of the manifold advantages you get from an insurance cover that offers market-linked returns. These plans are specifically called ULIPs (Unit Linked Insurance Plans) and give the dual advantage of insurance and market-linked investments, along with significant tax* benefits.
All these benefits and more help you grow your wealth and accumulate a large corpus to fulfil your desired financial goals. Apart from enabling you to achieve your financial goals, this specific life cover policy provides comprehensive insurance cover for your family, financially protecting them in case of your unfortunate demise.
Today, a ULIP is considered a good life insurance policy option in India, offering varied benefits and high returns that help to grow and shield your wealth.
Everything you should know about how life insurance can build your wealth:
Competitive, market-linked returns: A life cover policy like a ULIP plan that offers the dual advantages of investment and life insurance helps to protect your wealth from being eroded by the impact of inflation in the long run.
When you invest in a life insurance policy, such as ULIP, a part of the premiums you pay are invested in market-linked funds comprising equity, debt and balanced funds. You can choose your funds as per your risk tolerance and financial objective. If you choose equity-based funds, you can earn significantly high market returns. It allows you to offset the impact of inflation in the long run and prevent your wealth from losing value over time. You can also switch your funds based on their performance.
Tax* benefits: Taxes* are an integral part of our earnings and eventually reduce our capability to grow wealth. However, when you invest in a life cover policy like ULIP, you can reduce your tax* liability and then increase your disposable income and wealth in the long run.
ULIPs enjoy the same tax* treatment as those applicable to other life insurance policies. The premiums you pay for your ULIP insurance cover are tax-deductible under Section 80C of the Income Tax Act, 1961. Further, your investment grows tax*-free until withdrawn. The plan, in turn, gives you a great opportunity to grow your wealth without having to pay any taxes*.
Apart from these tax* advantages, the maturity benefits of the ULIP insurance cover, along with the bonuses@ and returns, are exempt from taxes* under Section 10(10D), provided the annual premiums are below the Rs. 2.5 lakh premium threshold.
Further, the death benefit of the ULIP plan is also free from taxes* like other life insurance plans. These tax* advantages of the present and future give you and your family a great opportunity to accumulate a significantly higher sum for the future.
The flexibility of investment: Apart from offering the double benefit of insurance cover and investment, ULIP plans also give you enough flexibility to ensure your capital remains safe and your wealth is least impacted by market volatility. The also provide life insurance protection and financial security to your loved ones
A life cover policy like ULIP gives you the option to invest as per your risk tolerance and financial objective. So, if you are a risk-taker, you can invest in equity funds and get high returns. However, if you want more secure returns at a low risk level, you can opt to include debt-based funds in your life cover policy. You can also choose a combination of equity and debt by opting to invest in balanced funds. It ensures that you have a chance to grow your wealth on your terms.
Further, ULIP also gives you the flexibility to make a fund switch. It means that you can change your investment funds. For instance, suppose you were heavily invested in equity funds and earned high returns. However, as per the current market situation, you do not think market movements favour your fund, and there is a high risk of volatility.
You can switch your fund allocation to debt or go for a balanced fund portfolio in such a case. This feature of ULIP helps you to stabilize your wealth from the effects of market movements.
Overall, you work hard all your life to create a financial security net for your and your family’s future. However, unless you invest your money smartly, your savings will not be sufficient to cover your needs. The objective is to build a strong corpus over time and accumulate significant wealth that can outpace the impact of inflation in the long run.
In this regard, a ULIP is a good life insurance policy option in India that offers the twin advantages of insurance cover and high returns through flexible investments. Further, the tax* benefits of these life insurance plans give you an added advantage to shield your wealth.
However, you should be careful and opt for secure and flexible insurance cover policies. Tata AIA life insurance plans have a wide range of plans to choose from. You can visit the website, choose your plan and get life insurance quotes in no time.
Make a wise decision today so that your future self will thank you.