How To Grow Money With The Help of Life Insurance
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When you think of a life insurance plan, you probably imagine a safety net for your family and loved ones, isn’t it? And that’s quite an accurate picture, because at its very core, a life insurance plan is a life cover that helps keep your loved ones financially secure, even if something happens to you.
But today, a life insurance plan can be much more than just a life cover. With many types of life insurance plans available in the market these days, there are several other benefits that you can enjoy, thanks to life insurance.
You can reduce your tax burden.
You can save up for the major milestones in your life.
You can set up an alternate source of income for your post-retirement life.
And - wait for it - you can even grow your money and create wealth with life insurance. Yes, you read that right. Life insurance is an often-overlooked wealth creation tool.
More specifically, there's one type of life insurance that can help grow your money over the years. And that is a Unit Linked Insurance Plan (ULIP).
What is a Unit Linked Insurance Plan?
A Unit Linked Insurance Plan (ULIP) is a kind of life insurance that combines two key advantages - insurance and investment. The premium you pay to the insurer gets you both these benefits. So, you enjoy the advantage of a life cover, as with all life insurance plans. In addition to this, your money is also invested in market-linked funds of your choice.
Over the course of the policy term, as the value of the market-linked assets increase, so does your corpus. And your money grows according to the market growth rate.
How does a Unit Linked Insurance Plan work?
When you purchase a Unit Linked Insurance Plan, you need to pay a premium to the insurer, just like you would for any other kind of insurance. This premium not only buys you a life cover, but it also gives you the opportunity to create wealth.
Your money is invested in different funds, based on your choice and preference. Typically, you have a wide range of fund options under a single Unit Linked Insurance Plan. These funds invest in a variety of assets, right from fixed income instruments and liquid financial products to direct equity and money market instruments. You can choose to invest in any number of funds, in any combination, based on what your financial goals and needs are.
ULIP: An example
There are many Unit Linked Insurance Plans available in the market. One such plan is the ABSLI Wealth Assure Plus. Under this plan, you choose from 16 funds to invest in!
Each fund comes with its own investment objective and its own strategy. There are funds that help you preserve your capital and earn a regular income, as well as funds that help you grow the capital invested at moderate to high levels of risk. You can choose the market-linked funds that align with your risk appetite and your financial needs and invest in them.
In case of the unfortunate demise of the policyholder, the nominee will receive the basic sum assured as well as the basic fund value as on the date of intimation of the demise. And the death benefit shall not be less than 105% of the total basic and top-up premiums paid.
However, if the policyholder survives the policy term, the basic fund value as on the maturity date and the top-up fund value, if any, will be paid out.
How does a Unit Linked Insurance Plan help you grow your money?
So, now that you know how a ULIP works, you’ll be able to better appreciate the manner in which this kind of life insurance can help you grow your money. There are many features built into a ULIP that make it an ideal wealth creation tool. Check out some of these features below.
ULIPs come with a lock-in period
The first rule of long-term wealth creation is to remain invested over the long term. This is particularly true for market-linked investments. The longer you remain invested, the better your returns are likely to be. And ULIPs make it easier for you to stay invested, because they come with a lock-in period of 5 years.
This means that you cannot withdraw your money during the first 5 years of purchasing the policy. So, you will remain invested over this term in a disciplined manner, thereby giving your money the opportunity to grow as per the market rates.
They help you earn market-linked returns
ULIPs invest in market-linked instruments like direct equity, fixed income securities and money market instruments. If you have a higher appetite for risk, you can choose to invest in risky yet high-reward assets like high quality equity shares. Depending on the market’s performance over the long term, your money could grow exponentially.
The opportunity to invest in the markets can give your money an edge that mere savings cannot offer. And this is one of the key ways in which life insurance plans help you create wealth over the long term.
They help you align your investments as needed
ULIPs also allow you to switch your money from one fund to another during the policy term. This can be useful in many ways. It helps you align your investments with your financial goals and your risk profile. So, you can switch from riskier assets to safer investment options as your plan approaches maturity. This allows you to take advantage of the high rewards that risky assets offer, and simultaneously, it ensures that your gains are preserved as the maturity approaches.
The fund switch option is also useful if you want to realign your investments based on market movements. So, if you find that the equity markets are performing well, you may want to remain invested in equity-oriented funds. On the other hand, if there is a rise in the interest rates on fixed income securities, you could take advantage of that by switching some additional money to debt funds.
ULIPs, like other life insurance plans, also offer a life cover. So, in case something untoward happens to you, you can rest assured that your loved ones not only have a financial safety net to fall back on, but also a sizeable corpus thanks to the wealth creating potential of Unit Linked Insurance Plans.
Read next: HOW YOUR LIFE INSURANCE CAN HELP YOU SAVE TAX
Your life insurance plan can do more than just help you grow your money. It can also help you save tax along the way. Want to know the many ways in which a life cover can bring down your tax burden? We have a blog that has all the details.
AFRAID TO TAKE ON MARKET RISK BUT STILL WISH TO SAVE FOR YOUR LONG-TERM GOALS?
The ABSLI Assured Savings Plan can help you with this. For one thing, it gives you guaranteed benefits on death or maturity, so you know exactly how much the payouts will be. Another advantage that this plan gives you is a boost in your maturity corpus, thanks to loyalty additions that accrue year on year.
All this, plus tax benefits, flexible premium payment term options and an optional joint cover for your spouse - that’s what this life cover gives you!
ABSLI Assured Savings Plan (UIN: 109N134V02) is a non-participating traditional insurance plan.
ABSLI Wealth Assure Plus (UIN: 109L120V02) is a non-participating unit linked life insurance plan. THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER
ABSLI Life Shield Plan
A term insurance plan that offers you the flexibility of plan options suitable for your family's non- negotiable goals and ensure they need not compromise on their lifestyle. UIN: 109N109V06
- Choice of 8 plan options
- Cover your spouse under the same policy
- Longer Life cover till age 85
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