How ULIP Helps You Meet Your Long-Term Life Goals

Unit Linked Insurance Plans, ULIPs, are investment-oriented life insurance policies that help you save, invest, earn market-linked returns and also get insurance coverage during the term. In fact, being investment-oriented plans, ULIPs can help you create a corpus for your long-term financial goals.

Here’s how –

1. Different ULIPs for different needs

There are different types of ULIP plans available in the market. Thus, you can create an earmarked and independent corpus for each financial goal. For instance, you can opt for child ULIPs to create a secured corpus for your child’s future. Child ULIPs come with a premium waiver benefit that helps you secure a corpus for your child even when you are not around.

Similarly, pension ULIPs help you create a retirement fund by accumulating your premium and offering market-linked returns on the same. While you enjoy insurance protection during the policy tenure, in the case of maturity, the pension ULIP allows you to opt for lifelong and guaranteed¹ pensions from the accumulated corpus.

Thus, with the different types of ULIPs available, you can plan for your long-term goals and even create an independent savings corpus for each.

2. Flexible tenure options

ULIPs come with a flexible range of policy tenure and premium-paying tenure so that you can choose a term that aligns with your financial goals. The term starts from 5 years and can go up to 30 or 35 years. There are whole-life ULIP too that run till 99 or 100 years of age allowing lifelong protection and long-term corpus creation.

So, for your long-term goals, you can choose a suitable tenure and then accumulate a corpus through disciplined investments.

Even when it comes to premium payments, there are flexible tenures that you can choose from. You can pay a single premium at the onset of the policy or pay for a limited tenure. Alternatively, you can choose the regular premium paying term and pay premiums throughout the term of the policy.

3. Variety of investment funds

ULIPs offer different types of investment funds. There are equity funds that invest primarily in equity-oriented securities. These funds have a high return-generating potential and high investment risks. Then there are debt funds that invest in debt securities and have a low risk. You can also opt for the balanced fund that invests in a mix of equity and debt.

So, depending on your risk appetite, you can choose suitable funds and create the desired corpus for your goals.

4. The flexibility of managing investments

ULIPs are flexible investment avenues. You can switch between the investment funds during the policy tenure if your risk appetite changes or if the market dynamics change. Switching helps in maximizing the return potential of your investments while minimizing risks.

Then there is the facility of partial withdrawals. These withdrawals give you access to liquid funds during the policy tenure to meet your financial needs.

You can also pay additional premiums through the top-up facility if you want to increase your savings and create an adequate corpus for your goals.

5. Tax-saving benefits

Lastly, ULIPs help you create a tax-efficient corpus for your goals. The premiums that you pay are allowed as a deduction at the time you invest in ULIPs. The deduction is allowed for up to 10% of the sum assured with a maximum limit of Rs.1.5 lakhs under Section 80C of the Income Tax Act, 1961.

Switching is completely tax-free allowing you to manage your investments without incurring additional taxes.

The death benefit is fully tax-free so your family can get a lump sum benefit in your absence. The maturity benefit is also tax-free under Section 10(10D)² provided that the aggregate premium paid was up to Rs.2.5 lakhs.

So, with ULIPs, you can save taxes both when investing into the policy and also when you get the policy benefits. With these benefits and a long-term horizon, ULIPs can help you accumulate a suitable corpus for your financial goals. You can earn market-linked returns so accumulate a good corpus with a long-term perspective. Moreover, since the corpus is linked to the market, it is inflation-adjusted so inflation does not eat into your effective returns.

Compare the ULIPs available in the market and choose suitable plans that can help you create the desired funds for your long-term financial goals.