Everyone dreams of living a comfortable retirement life and building a significant corpus. If you harbour the same dream, you may try to save as much as you can throughout your working years so that you don’t have to be financially dependent on anyone after hanging your boots.
However, you must know that inflation is proliferating. And, all your years of savings would not give you the standard of living you expected to have. So, it is paramount that you let your savings work and grow over the years. And one of the best ways to accomplish that is to invest in a ULIP plan.
Many people prefer investing in the ULIP plan in India for two reasons. Since it is a life insurance policy, it allows them to secure their family’s financial future against uncertainties. Two, it gives them the flexibility to invest in different assets, grow their capital and build a corpus for future goals.
Let us see why ULIP is an excellent choice to create a financial corpus
As mentioned earlier, ULIP is primarily a life insurance policy, which means you need not pay a separate life insurance policy and pay a premium for it. Instead, you can invest that amount in long-term options like equity funds through ULIPs and get valuable returns over time.
One of the significant features of the ULIP plan is the fund switch option. When you invest in ULIP, the insurer allows you to change your investment from one fund to another. The number of free switches allowed in a year may vary from one insurer to another. You can use this feature to your advantage.
When you periodically review funds’ performance, you can switch your investment from the underperforming funds to those that offer stable returns. Similarly, if you have surplus funds, you can use it to purchase additional units of the fund and leverage the market volatility to get attractive returns in the short term.
Another vital feature of ULIP is its EEE (exempt-exempt-exempt) tax status. The premium you pay for the policy is subject to tax benefits up to ₹1.5 lakhs in a financial year under Section 80C of the IT Act. The death benefit your family may receive is fully tax-exempt. Finally, the ULIPs allow you to partially withdraw funds from your corpus after the lock-in period; the amount you withdraw is tax-exempt.
Since ULIPs allow you to invest in different assets like debt, equity, balanced funds, governments and stocks, you can create a diversified and balanced portfolio. In the long-run, this ensures that the risk is mitigated through different market cycles, and you build a sizeable corpus.
When you invest in ULIPs, you need not actively manage your portfolio. You only have to decide the fund allocation ratio in different assets as per your risk-taking capacity and goals. Professional fund managers manage your funds and use their sharp acumen to make investment decisions. This means the chance of losses is minimal, and you have good chances of building a corpus and accomplishing your goals.
Thus, benefits like professional management, flexibility to invest in different assets, and long-term tax savings make ULIP a must-have in your portfolio.