Why ULIPs Make Great Future Investments

Unit Linked Insurance Plans, or ULIPs, combine investment and insurance features. This means that a ULIP policy provides the policyholder with life insurance coverage while simultaneously enabling the policyholder to make money, thanks to the investment component included in this plan.

In this case, the policyholder or investor is in charge of the investment, with the premium they pay being invested in various market-linked instruments after applicable deductions. In addition, the future growth potential of these funds contributes towards making ULIPs desirable investments. So what else makes ULIPs excellent investments for the future? Here’s learning more about some of these factors.

Why are ULIPs excellent investments? 

• ULIPs offer life coverage throughout the policy tenure.
• Investors can choose from equity, debt, liquid, and hybrid funds.
• The investor can periodically switch funds in order to sync their portfolio as per future needs or lower risks/scale up profits based on prevailing market conditions.
• Long-term returns from ULIPs can potentially outweigh inflation and help investors build a corpus for future goals like purchasing a home, retirement, higher education and the wedding of your children, and so on.
• ULIPs offer tax deductions on premium payments under Section 80C up to Rs. 1,50,000.

These are some of the key reasons making ULIPs great options for investments. Yet, what are some things that any investor should keep in mind while choosing a ULIP? Here’s looking at these aspects as well.

Things to keep in mind while investing

• It is important to remember that investing in capital markets entails certain market risks. Nevertheless, since the money is managed and invested by specialists, there is a certain degree of reduction in the dangers, but they still exist.
• Before investing in the ULIP, confirm that the investment in such a policy is consistent with your vision for the future. The overall investment may need to be carefully estimated if a predetermined amount of money is required upon maturity or the investor’s passing.
• The tenure is another crucial aspect. The majority of ULIP investments are long-term ones. They provide the best possible returns when the money is left invested for a long time. It is not a quick-win investment strategy. Therefore, staying patient for the long haul is a must. Investment in ULIPs is not a good option if short-term finances are needed.
• The fact that the funds have a lock-in period of five years is another thing to keep in mind. This indicates that the money won’t be accessible during that time. The ULIP plan is a terrific choice if the investor has backup funds for emergencies and is financially stable. It is crucial to consider whether the person seeking to invest should consider that before moving forward because the invested funds will be locked for a while.
• ULIPs may come with varying charges. It is essential to check for these additional costs and consider how they impact your overall returns.

The primary point is to think of a ULIP plan as an insurance policy that simultaneously functions as an investment vehicle. Since an investment entails using a portion of the premium as an investment vehicle, it is possible to imagine how the fund will develop in the future. Of course, it’s not a guarantee that the policyholder will receive this, but it can provide an indicator based on market patterns. A ULIP calculator may be used online for estimating these returns.

It is crucial to remember that an investor’s willingness to take on risk determines whether or not they should invest in market securities. For example, a low-risk investor may choose to have their money invested in low-risk debt funds. Investing in areas where the risk is high but the rewards are equally attractive is also par for the course if the investor has a higher risk appetite. ULIPs provide this freedom to invest in both low-risk and high-risk fund types. Without incurring astronomical fees, switching across fund types is a simple enough process. Hence, a carefully chosen ULIP can be a good value addition to your investment portfolio.