In an age where there is a dearth of government jobs catering to your retirement, you will be in for a rude shock if you don’t invest money properly during your job tenure. Inflation should be factored in while planning your retirement corpus. Also, keeping all eggs in the same basket is not recommended. Taking an insurance policy is recommended as, during tough times, this money comes in handy. With so many options available for investment and insurance, people are often confused as to which is the best one for them?
Unit Linked Insurance Plan (ULIP)
ULIP is an excellent option for people to invest their money, providing the best of both- insurance and investment. You can regularly invest small amounts of money in ULIPs, and the company divides them to invest in equity or debt funds and life insurance. In this manner, you get both benefits without shelling out extra money! They have emerged as one of the safest and smartest long-term investment plan for people of all ages as it provides you with an opportunity to create wealth while also catering to insurance cover.
Things to Remember While Investing in ULIP
While ULIP helps kill two birds in one stone, there are a few things to remember while investing your hard earned money in it:
- The lock-in period for insurance is now 5 years, as per IRDAI (India’s Insurance Regulatory and Development Authority). However, to get maximum benefits from ULIP insurance cover, you must hold the insurance policy for 10-15 years.
- Fund managers deal with investment for the clients. However, you can switch your investment portfolio between debt and equity funds if you have knowledge of market trends.
- It is important to realize your ultimate goal for investing in ULIP and make sure you choose the correct ULIP option after comparing it with different plans, risk factors, and the lock-in period.
Benefits and Returns
Apart from being a part of your retirement amount, investing in ULIP can also be sued for your child’s education, wealth creation, apart from policy benefits for the family in case of untimely death. Other benefits that ULIP brings on board include –
1. Tax Benefits
Any premium paid on ULIP (maximum 1.5 lakh per year) is exempted under Section 80C of the Income Tax Act 1961. Additionally, the amount received on maturity is exempted from any tax under Section 10(10D).
2. Accomplish Financial Long Term Goals
To build good capital for long-term financial goals like child education/marriage or retirement plans, you can invest in ULIP. Compared to fixed deposits, you get a better rate of interest.
3. Life Cover
Both Life Cover and the Accidental cover is available on investing in ULIP. A personal accidental cover of up to Rs. 50,000 irrespective of the target amount, and a lifetime investment cover of a maximum of Rs. 15 lakh is provided to investors’ next of kin.
4. Cost-Effective Flexible Investment Option
You can switch between debt & equity funds to generate better returns on your portfolio with several free switches available. While debt instruments lend stability, equity investments help in providing market-related returns.