The ULIP plan is gaining so much popularity nowadays that everybody is opting for it. However, there are certain things to know about ULIP schemes before opting for them. This article is all about the ULIP policy.
What is the ULIP plan?
ULIPs policies are life insurance policies that are specifically designed to assist you in meeting your long-term financial objectives. One of the significant distinctions between ULIPs and other investments is that, in addition to all investment growth, it may secure the accomplishment of your objective regardless of natural contingencies.
Here are some unique features of ULIP plans.
- ULIP schemes provide a variety of investment alternatives
Depending on their risk tolerance, ULIP policyholders can choose to invest their premium in either equities or debt or even a combination of the two. Someone who is willing to take on a high level of risk can invest in equity funds through ULIPs, whilst someone who is more cautious can invest in mutual funds.
- A top-up option is available with ULIPs
In rare situations, a policyholder can modify the amount of premium they pay into their ULIP plan and is not required to pay the same amount each time. ULIP plans allow the company to top up or add more monies to their existing investment.
- Section 80C of the Internal Revenue Code allows for the deductibility of ULIP plans
Under Section 80C of the Income Tax Act of 1961, a ULIP policy is a tax-deductible investment. This implies that payments of up to Rs 1 lakh remain tax-free for such investors, rendering ULIP plans appealing to first-time investors. Even after the plan reaches maturity, the ultimate sum is tax-deductible under Section 10 (10D) of the Income Tax Act of 1961.
- The lock-in phase promotes discipline
ULIP insurance may include a lock-in duration of roughly five years, which means that the investor must continue to contribute money to the policy throughout that time period. The lock-in term helps investors to go on a regular basis and develop their wealth.
- Various premium payment alternatives
ULIP plans are well-known for their flexibility, which extends to the payment structure as well. Whenever it comes time to pay premium rates, investors have three options: single premium plans where the entire investment is compensated in a lump sum, regular premium plans where a predetermined price can be accumulated for the period of the ULIP plan, and restricted premium plans where the amount is paid for a set number of years.
- Maturity dates can indeed be postponed
Certain ULIP plans enable the investor to postpone the maturity date, which means that the day when the policy expires and the money may be completely withdrawn is pushed back into the future.
- Family planning is aided by the ULIP policy
Among the most appealing features of a ULIP policy is that it provides insurance coverage as well as death payments. So, if the investor dies unexpectedly, their family may rely on the ULIP to provide financial stability. ULIP plans are also useful for family planning, such as retirement and kids’ education, as well as in the event of an emergency.
A ULIP plan had traditionally been the preferred investment choice, particularly among young Indians in their twenties and thirties. They do provide a variety of return alternatives. Investors claim that their ULIP coverage benefits them in the long run by encouraging them to save and be mindful of their spending habits. The strategy delivers consistent profits, which is especially beneficial for young individuals just beginning out.
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