Benefits of Investing in a Unit Linked Insurance Plans (ULIP)

Posted by sammi maheshwari on February 28th, 2018

ULIPs are investment cum insurance instruments that combine the best of both life insurance as well as investment. The premium paid toward a ULIP is split into two parts: one part of the premium goes toward providing life cover to the insured person while the other part of the premium goes toward investing in money market instruments. A Unit Linked Insurance Plan (ULIP) has many inherent benefits as an investment plan and also comes with the added advantage of insurance benefits.

Here are a few other benefits of investing in ULIPs,

Choosing the Investment - One of the main advantages of investing in a Unit Linked Insurance Plan (ULIP) is that the investment mix can be chosen. A Unit Linked Insurance Plan (ULIP) allows the insured person or the policyholder to choose how the part of the premium that is earmarked for investing is invested, i.e., the policyholder has the option of choosing the mix of market entities, such as equity or debt instruments, to invest in. Low-risk takers may want to invest in debt instruments while people with a moderate risk profile may want to invest in a mix of both equity as well as debt instruments. A person with a high-risk profile, on the other hand, can choose to invest the entire amount of the premium that is earmarked for investment purposes in equity instruments only.

Tax benefits of ULIPs

In addition to offering a high return on investment, along with ULIPs tax benefits, meaning that a person can save on taxes by investing in Unit Linked Insurance Plan (ULIP), making ULIPs a great tax saving insurance plan.

Not all investment instruments come with tax benefits, meaning that not all of them help people to save on the tax outflow. However, since a Unit Linked Insurance Plan (ULIP) is also a life insurance product, policyholders are eligible for tax benefits under section 80C through the tax saving insurance plan. In addition, all payouts received by the policyholder as part of the Tax savings plan (ULIP) are exempt under section 10D India’s Income Tax Act of 1961.

Thus, investing in a Unit Linked Insurance Plan (ULIP) not only offers the benefits of insurance cum investment, which help investors create money but also save money through the tax savings plan.

However, one must remember that investments made under ULIP plans are subjected to risks as per market fluctuations, hence one must consider their risk-appetite and financial capacity before making an investment.