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What Makes ULIPs So Attractive

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What Makes ULIPs So Attractive
October 30, 2017
 

Financial planning helps in meeting short-term and long-term goals and also aids in a secure future. There are numerous financial investment options available to the Indian investors. Among these options, Unit-Linked Insurance Plans (ULIPs) are a popular investment vehicle.

Understanding ULIPs

ULIPs are a type of life insurance plans, which offer dual benefits of insurance as well as investment. As the name suggests, such an investment option is a market-linked product and hence, is subject to risks associated with the capital markets. You may invest in stocks, bonds, or mutual funds, as per your needs and risk appetite.

There are numerous ULIPs in India, which come with a host of features and benefits. ULIPs have garnered the attraction of Indian investors due to the numerous advantages it has to offer. Following are six reasons why ULIPS are attractive to Indians.

  1. Different risk appetite

    While some investors have a large appetite for risk, some may be conservative in nature and hence, seek to make low-risk investments. ULIPs provide an option of investing in high-risk as well as low-risk instruments. If you have a huge risk appetite, you may invest in equities. However, if you are risk-averse, you may prefer investing in both debt and equity in order to enjoy high returns at minimal risk.

  2. Market trends

    Based on capital market trends, you may switch from one asset class to another. You may even change your ratio of investment across equities, money market instruments and debt instruments. If you witness a positive trend in the performance of the capital, you may invest in equities. Similarly, if the market fails to perform, you may switch from equities to relatively safer asset classes such as money market instruments or debt instruments.

  3. Significant tax benefits

    One of the most attractive features of a ULIP is the tax benefits offered. Under the Income Tax Act, 1961, tax benefits are eligible on premiums paid as well as the withdrawal amount. Under Section 80C of the Income Tax Act, 1961, you may claim up to INR 1.5 lakh on premiums paid. The death benefit is tax free. Moreover, you may enjoy tax benefits of the maturity amount under Section 10(10D) of the Income Tax Act, 1961.

  4. Availability of top-up option

    You may extend the coverage of your insurance plan by paying an additional premium. This option, known as top-up, ensures that you receive maximum coverage under your ULIP. Moreover, top-ups are eligible for deductions under Section 80C of the Income Tax Act, 1961. However, you are eligible for such tax benefits only if the aggregate premium is not more than 10% of the sum assured.

  5. Long-term in nature

    An important aspect to take into consideration while investment planning is long-term financial security. ULIPs are long-term in nature and hence these appeal to investors who want to meet their long-term financial goals. The amount collected may be used for a variety of purposes, such as children’s education, marriage, retirement planning, emergency expenses, besides many others.

    Investing in ULIPs allow you to enjoy the dual benefits of life insurance and market-linked returns. It also inculcates a habit of regular savings and helps you accumulate wealth in the long term. You may, therefore, compare the best ULIPs and choose one that meets your financial needs.

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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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