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Unit linked insurance plans, or ULIP is an investment product that offers the best of both worlds – insurance and investment. It is a product which is linked to the market and offers complete flexibility. If you are looking for an investment product that will provide you with a life cover as well as help your investment grow, you need to consider ULIPs.
Purpose of ULIPs
The idea behind a Unit Linked Insurance Plan is to achieve investment as well as insurance. Their goal is to give you insurance protection while building your wealth. Thus, in addition to creation of wealth, you also get a cover on your life. In case of untimely death, the life cover helps your family maintain their lifestyle.
When you invest in a ULIP, a small part of the premium goes into mutual funds, stocks, and bonds (as per your preference) and the remaining amount is utilised in providing you with an insurance cover. The investment is linked to the market, and the fund managers track your investment.
Are They Useful for You?
In case you are considering whether or not you should invest in ULIPs, here are some things you need to know.
- Flexibility in Managing Portfolio Risk
ULIP could be the ideal product for you as it allows you to switch your portfolio between equity and debt based on your risk appetite. It allows you to decide where you want to invest your money. Based on the market conditions and your goals, you can choose between equity, debt and balanced funds. You might not have the required time or the knowledge to manage the portfolio between debt and equity, hence, the fund managers can make the right decision for you.
If you know how the market functions and how equity returns work, this is the perfect product. Since the total investment amount is divided between debt and equity, the overall risk of the portfolio can come down, allowing you to manage the risk with ease. If you think that a significant amount of the portfolio is invested into equity shares, you can make a shift to debt in order to reduce the risk.
- Overcome Multiple Behavioral Biases
Several behavioural biases influence your investment decisions. As an investor, you might have faced a war between analytics and emotions. When you invest in the best ULIP policy, you can overcome the behavioural biases and make an informed decision. Various behavioural biases like loss aversion, mental accounting and control bias can lead you into making the wrong decision. With insurers like Max Life Insurance offering ULIPs that are managed by expert professionals, you do not have anything to worry about. You can overcome all the biases that could hamper the growth of your portfolio.
- Partial Withdrawals
With ULIP, you can withdraw a portion of the investment after the end of the lock-in period if an emergency arises. Moreover, all the withdrawals are tax-free.
- Tax Efficiency
The biggest benefit of investing in ULIP is the tax advantage. You can get a tax advantage up to an amount of INR 1.5 lakh under Section 80C on the amount invested into ULIP in the form of a premium. Even the money received by the nominee after the death of the policyholder is tax-free. In addition, the partial withdrawals also remain tax-free for you.
If you are looking to gain from the equity market, this is the best option for you. However, to avail all the benefits of ULIPs, it is important to remain invested for a long-term. Whether it is an insurance cover or an investment product, short-term will not suffice.
Thus, if you are looking for one product that will fit your insurance and investment needs, ULIP is the one. Instead of investing in two products for a life cover and growth of your wealth, choose ULIP and manage your funds with convenience and ease.
Helps you overcome multiple behavioural biases that impede your investments. and ULIPs are tax efficient, Even repatriable)