Which are the best ULIP plans in India?
Your money should work for you even when you don’t. A ULIP is one of the best modes of ensuring that your money works hard and creates wealth for your future.
It is common knowledge for most investors, that their income must be made to work even when they actively don’t. It is wrong to assume that your income from your job or business will sustain you forever — it is available only till the time that you are still working. When you stop working, the income stops.
Not so with investments. The right investment options are those that create wealth for you even when you are not actively involved in their growth. Once such option is the Unit Linked Insurance Plan (ULIP).
What is a ULIP?
A Unit Linked Insurance Plan is a life insurance product that offers appreciation over the premiums that you invest in it. This is how it works: When you pay the annual premium, one part of it is paid towards the policy premium while the other is paid towards buying units of equity or debt securities. Thus, while the ULIP offers life insurance coverage, it also offers the opportunity for wealth creation.
The best ULIPs in India offer a combination of benefits, like high appreciation over a period of time and affordability in the premium. Most Unit Linked Insurance Plans’ growth is mapped over a period of 10 years or more, with a conservative estimated rate of 8% annually. The more you invest, the more the growth potential of the ULIP.
The best unit linked insurance plans today offer multiple fund options and 3 policy terms. Infact, some compaies like Aviva Life Insurance, offers 7 fund options along with switching and redirection facilities. You also get tax benefits on the premiums you pay every year under Sec 80C of the Income Tax Act, 1961.
Some salient features of ULIPs…
1. The plan offers both life insurance and investment: Your invested sum grows with exposure to both debt and money markets. The longer you stay invested in it, the more it mitigates risk as well. The ULIP grows steadily and offers protection to you and your loved ones if any untoward incidents occurs. Hence, it provides two benefits!
2 It has a lower risk propensity than other market-linked instruments: As compared to equities and other instruments, the ULIP offers lower risk because it invests in high grade securities for a longer period of time. It may register growth ranging from 8% to 10% per year, based on market trends. The ULIP rarely performs negatively.
3 The fund is managed professionally: You don’t need to monitor the growth of the fund on a daily basis. The insurer appoints a fund manager to oversee the growth of the unit linked insurance plan. The manager can study the NAVs and advise you on whether you should continue with the same units or switch to better performing ones. This decision also influences the outcome of the fund in a positive way.
4 Goal-Oriented Savings: ULIPs are designed to address key long-term financial goals such as buying a house, funding your child’s education, buying a new car etc. as it helps you in building a sizeable corpus in a disciplined manner. Thanks to the power of compounding, ULIPs provide much higher rates of return. Moreover, when you invest for the long-term, it is possible to absorb the market risks as well as your money grows faster over a longer time horizon.
5 Flexibility: ULIPs come with a range of equity, debt and balanced fund options to choose from. As a result, you can invest your money as per your risk-appetite and financial needs. ULIPs also give you the opportunity to move your money between different funds in order to help you earn maximum returns
6 Tax Benefits: You receive tax benefits on your premium payments, under Section 80C and Section 80D. The growth on your money is not taxable. You can make completely tax-free debt-equity Switches. Also, the maturity benfits is not liable under LTCG as is for mutual funds
Overall ULIPs can be an ideal investment option for your long-term financial goals!
