Investments are an important avenue to build wealth. With the increasing uncertainties at the global level, people have started realising the need for insurance. It is in such a scenario that a ULIP plan has gained significance. Insurance and investments have to be accumulated and secured for maximum protection and benefits to accrue in the long term. Does a ULIP policy serve as an excellent long-term plan? Certainly, yes! Let us look more into ULIPs and understand the reasons why they’re a good long-term investment.
What is a ULIP Plan?
It is a life insurance policy that provides dual benefits. One portion of the premium provides life cover, and the rest is invested in the securities market for market-linked returns.
Why is it an excellent long-term investment?
Lock-in period:
A ULIP policy has a lock-in period of 5 years. It is only after this fixed term that a partial withdrawal is permitted. Hence, by way of compulsion, you are driven to a long-term plan. It will develop the discipline of staying invested and, in addition, increase the benefits as well.
Flexibility:
The portion of the amount invested in the securities market is invested in equity funds, debt funds or hybrid funds. Based on your risk appetite, you can choose the fund. You can choose the equity funds for higher risk, debt funds for lower risk and hybrid funds for moderate risk. Market linked investments provide higher returns in the long run. However, when prices fall, there is a rush to sell off equity holdings. In a ULIP plan, you have the flexibility to choose between the different funds to get better and increased benefits.
Professionally managed:
An expert team from the life insurance company decides on the funds for ULIP investment. Hence, it is completely reliable and safe, especially if you are a first-time investor. You can let the insurer manage the funds for you in the long term if you are a busy professional. However, the insurer will provide timely notifications on the fund price movements if you need to intimate any changes. It is a transparent investment policy. Compared to its peers, such as a mutual fund that provides professionally managed investment, it provides the switching option that enhances the benefit.
Tax benefits:
A ULIP plan is considered one of the best tax-saving investments. The premium amounts paid towards the policy and the ULIP returns are considered for a tax deduction and a tax exemption under the Income Tax Act, 1961, subject to certain conditions.
Invest in small amounts:
With time, you will have higher family commitments. Your income will contribute to different short-term and long-term family financial needs. Naturally, you look for an investment scheme that you can regularly invest in small amounts for higher returns to accrue over the long term. As against other financial instruments, you receive returns and life cover with periodical payments to protect your family members in the long run. You can also enhance the ULIP insurance with additional rider options to include varied benefits. The TATA AIA ULIP plan provides various such opportunities to customize the plan for a better investment experience.
Conclusion:
ULIP policies are a good option for long-term investment. It is a safe, professionally managed, tax-saving investment with flexible options to switch between the funds that also provides insurance benefits for a very long period. The lock-in period will keep you invested for better ULIP returns. If you are looking for a comprehensive plan with insurance and investment at the right balance in the long term, the ULIP plan is certainly the best choice.
