Why Is ULIP The Right Investment Option For The Long Term?
When making investment decisions, it is essential to consider the long term. If you make strategic investments, you can reap various benefits such as relatively high long-term returns, tax* savings, etc., for many decades to come. ULIP insurance plans are one such long-term option to consider. A ULIP plan combines the benefits of a term life insurance policy and a profitable financial investment.
If you are wondering how ULIPs work well as a long-term plan, let’s discuss its various features and advantages that make it a strong contender for your investment portfolio.
Why ULIPs are good for the long term
Here’s why ULIP plans can be a great addition to your investments and life insurance protection option for the long term
When you holistically look at your financial portfolio for the long term, you have to consider different financial needs such as wealth creation, life insurance, health insurance, retirement planning, tax* saving, etc. A product like ULIP insurance designed to cover two separate financial needs by way of one policy is advantageous to your portfolio. With a ULIP plan, you get a life insurance cover with the opportunity to invest and grow your money. And it doesn’t stop here. Depending on the ULIP policy you opt for, you can also add health riders# such as hospitalization, disability, critical illness, etc.
Flexibility and variety
New age ULIP plans offer investors benefits at par with mutual fund schemes. This means you can choose funds according to your financial goals and decide between equity, debt, liquid, balanced, cash, etc. There’s variety in the funds to choose from and added flexibility with the fund switching facility. Tata AIA Life Insurance offers Smart Sampoorna Raksha(UIN- 110L156V02), a unit-linked, non-participating, individual life insurance plan for savings and protection. You have 11 different fund options to choose from under this ULIP insurance plan, and you can pick any or all of them, depending on your goals.
When you’re making a long-term investment, you cannot ignore the tax planning aspect. Even though your primary investment goal may not be to save tax, it’s prudent to figure out if you can. With a ULIP policy, you get a tax deduction for the premium you pay for the policy under section 80C of the Income Tax Act, 1961. The proceeds from your ULIP plan could also be tax-free. Considering the tax-saving aspect, ULIP plans are definitely an investment to consider for the long term coupled with life insurance protection. It’s essential to note that ULIP is a kind of investment where you buy the policy once, but you avail of the tax benefits every year when you pay the premium.
How ULIPs can give high returns
Returns are a primary aspect to consider while making any investment, especially one for the long term. ULIP plans are capable of providing high returns. You just have to keep certain things in mind when investing in a ULIP insurance plan.
Life stage-oriented decisions
While saving in a ULIP policy, remember to optimize your asset allocation. By investing in different types of funds, you can diversify your portfolio and minimize market risks. So, if one of the asset classes you invested in is making a loss, it can be compensated by another asset class that is making a profit. This advantage of asset allocation is further enhanced in ULIP plans due to the fund switching facility.
ULIP plans make for a good long-term investment as they allow you to consider your changing goals as per your life stage and also offers life insurance protection. For instance, if your ULIP plan is for 25 years, then as time passes, your risk appetite and priorities will change. As you get closer to retirement and your risk appetite decreases, you may want to switch from equity to debt funds.
ULIP plans offer numerous benefits, including a life cover, high returns, tax*-saving, and flexibility, and qualify as a safe and lucrative long-term investment. You can figure out the right plan and premium amount for yourself using an online ULIP calculator.