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Scared to take investment risks? ULIP can still be your pick!

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Scared to take investment risks? ULIP can still be your pick!
August 03, 2023

In this policy, the investment risks in the investment portfolio is borne by the policyholder

Are you someone who prefers to stay away from market risks as much as you can? Understandably that narrows down the scope of high-return investments as increased returns are mostly associated with high market risks. But do you know that Unit-Linked Insurance Plan (ULIP) can be the ideal financial instrument catering to your low-risk appetite and earning you good returns as well?

What is ULIP?

With a five-year lock-in period, a Unit-Linked Insurance Plan (ULIP) is a combination of life insurance and an investment opportunity. The premium you pay for it is thus used for both purposes—a part of it funds the life cover, while the rest is invested in equities, debt instruments or a mix of both, depending on the choice of the policyholder. And here the ULIP Calculator can be your resource to decide on the right mix of your portfolio.

So, how is ULIP a good investment choice for low-risk takers? Following are its benefits designed to help those who want to play it safe.

Skipping the risk:

Good ULIP plans have something in store for every risk appetite. For those who love high risk and high returns, investment takes place only in equity funds. But if you are looking for safe and secured returns, it has the option to go completely equity-free too and choose debt funds only.

The choice is yours:

You are the one who decides where and in what proportion your money gets invested. While equity funds are subject to considerable market risk and offer high returns, debt funds are risk-free. If you plan to avoid market risk completely, you can opt for investment in debt funds only. Alternatively, if you want to remain low-risk and yet seek better returns, check your ULIP Calculator and add a few equity funds to your portfolio.

Going auto mode:

If you are scared of risks and your market knowledge is limited, there’s an option to rely on the fund manager of the policy provider company. He’ll keep an eye on the market on behalf of you and regulate the debt-to-equity ratio of your portfolio as and when required. This auto mode of investment planning is termed the ‘wheel of life’ portfolio strategy which will gradually shift your money from equity to debt in the course of the ULIP term.

Trusting the flexibility:

ULIP has a flexible spectrum and allows the switch between funds, enabling you to restructure your investment portfolio. Majorly these plans allow 4 fund switches a year, while some of them even offer unlimited switches. So, despite being a low-risk taker you can always choose a bigger share of debt funds in your portfolio or make it completely equity-free when the market is going through a downturn. Here also, the ULIP Calculator can help you out.

Tax benefits: 

Earnings from ULIP are eligible for tax benefits under sections 80C and 10 (10D) of the Income Tax Act, 19611. Premiums paid up to Rs 1.5 lakhs per annum are exempted from tax while maturity or death benefits are tax-free if the total premiums paid don’t exceed the limit of Rs 2.5 lakhs. This guaranteed benefit is another incentive for the low-risk takers.

So, if you are scared to invest because of the volatility of the market, ULIP can always come to your help. Just trust your instinct and a bit of ULIP Calculator as well!

Related Article

ARN - ED/07/23/3259

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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1. Subject to conditions specified u/s 80C of the Income tax Act, 1961.

The afore stated views are based on the current Income-tax law. Also, the customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.

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