Raise your hand if you know the answer to the question, ‘What is ULIP Plan?’ We are sure that not many might know the same due to lack of awareness and untold facts about ULIPs. For starters, ULIPs stands for a Unit Linked Insurance Plan which is an investment instrument that not only keeps you secure but also invested in times of financial emergencies.
On the other hand, before making an investment in a ULIP Plan, it is advisable to understand the basics of this policy. Decoding the ULIPs allows the investors to not only make the most out of it but also proves beneficial in many ways. Moreover, the investor can also permanently erase the misconceptions and myths about a ULIP plan. Hence, take a look at these lesser-known facts about ULIPs that will ensure your investment in it right away:
List of the facts about a ULIP Plan:
- It is more than an insurance policy
Being dual in nature, ULIPs offers its investors with the benefits of insurance as well as an investment under a single plan. Due to this, ULIPs have rapidly gained the popularity for its protection and growth benefits. A ULIP Policy not only protects your family needs but also ensures the participation of an investor in equity markets.
- It has undergone reforms and remakes
There was a time when ULIPs were not considered as a preferable option of investment due to its high charges and low returns. However, after the introduction of Long Term Capital Gains Tax (LTCG), ULIPs have undergone some major changes which have made it reach to the top. The prime reasons for the popularity of new age ULIPs are its tax saving benefits as well as higher returns amongst its other perks.
- It offers two options for investment
When you invest in a ULIP Policy, it offers you two options of investment, namely, Type I and Type II. While Type I provides you with either sum assured or fund value, whichever is higher, Type II makes provision for both, sum assured as well as fund value, at the same time. However, if you’re looking for higher returns, then see to it that you invest in Type II of the ULIP Policy.
- It helps you stay invested for a longer duration
A ULIP insurance has a long-in period of 5 years which ensures the growth of your funds over the due course of the investment. Additionally, in order to make sure that you stay invested for even longer, ULIPs offer loyalty additions which guarantee your investment for the long term.
- It is known for its flexibility
Being a flexible product, ULIPs permits the benefits of multiple funds as well as the switching option, unlike mutual funds. When you invest in a ULIP Plan, you can make a choice from the available fund options like equity funds, debt funds, and balanced funds. Moreover, it also lets an investor switch from one fund to another based on his risk appetite as well as fund allocation.
- It allows you to save taxes
If you’re looking to save taxes, then investment in ULIPs is the perfect choice for you. This is because of the fact that ULIPs allows tax deductions on the premium paid under section 80C of the Income Tax Act, 1961. Additionally, the maturity benefit offered by ULIPs is totally free of taxes under section 10(10D) of the Income Tax Act, 1961. Besides, the top-up facility allocated by the policy is also exempted from the payment of taxes.
- It permits extension of maturity dates
This might come as a shocker to a majority of investors. With the help of some ULIPs, you can do so in order to use the product in order to gain optimum benefits. Stretching the maturity date of the policy enables the investors to reduce the loss during the time when the market levels are low. However, when the market normalizes, he will receive higher returns post the withdrawal of the maturity amount.
With their latest changes, ULIPs have proved time and again that they are no less than the traditional life insurance policies. Now that you know all these lesser-known facts about ULIPs, don’t you think its the right time to invest in one? Select the right type of plan as its entire gains depends upon the ULIP performance.