How Can Investments in ULIPs Help You in the Long Run?
A Unit Linked Insurance Plan (ULIP) is a crucial investment product that can help one achieve their financial goals effectively and efficiently. It offers the policyholder the power to simultaneously invest their funds in various assets while providing protection against any unforeseen adverse event. The premium you pay in a ULIP is divided into two parts: a portion goes toward life insurance, whereas the other part is invested in the markets, depending on your risk appetite.
Let us understand in detail how ULIPs help you grow your money in the long run.
- Maturity Benefits
As a ULIP policyholder, if you outlive the term of the policy, you can reap maturity benefits. This means you can claim the current value of your sum along with bonus/incentives (if any) at the time of maturity, provided the mandatory 5-year lock-in period has elapsed. However, it is noteworthy that the longer you continue with a ULIP, the higher will be the rate of returns at maturity.
- Compound Interest
As mentioned earlier, when you opt for a ULIP, you periodically invest a certain amount in the funds of your choice. Each year, you receive a fixed rate of interest, which is compounding by nature. This systematically invested amount can significantly grow over long-term thanks to the power of compounding!
- Tax Benefits
The amount you pay as the premium toward your ULIP is entirely deductible (up to INR 1,50,000) from your total taxable income under section 80C of Income Tax Act. Moreover, you are eligible for tax benefits upon maturity as well. So, as you are ULIP policyholder, you can claim substantial tax benefits without having to worry about other tax-saving instruments.
Evidently, ULIPs is an excellent hybrid product that provides you with an opportunity to earn substantial returns on your investment in the future while simultaneously offering you (and your loved ones) financial security.