Everything you need to know about ULIP before investing in it

When you start investing in a ULIP, you will have to pay a fixed premium towards your opted cover amount. A certain portion of the premium you are paying is used to provide insurance coverage, while the remaining portion is used to invest in equity and debt investments.

ULIP, which stands for Unit Linked Insurance Plans, is one of the most convenient ways to invest in an insurance plan and, at the same time, put some amount towards an investment tool. Making big financial decisions as soon as you start earning is the best thing you can do to take a step towards a financially stable future. You can even ensure a financially comfortable future for your family.

You can even ensure a financially comfortable future for your family. ULIPs are finance products that are very well known for packing in tons of benefits in just one plan. This is one of the reasons why ULIPs have gained so much popularity recently.

To know what is ULIP, the reasons you should opt for it, and how exactly it works, read the whole article.

Things you need to know about ULIP before investing

  • Lock-in period

In ULIPs, the lock-in period is five years. Compared to mutual funds, which are zero to three years, ULIPs have a longer lock-in period. This makes sure that you save more and earn more too.

A five-year lock-in period is comparatively better than investment tools that offer a lesser lock-in period. But if you are looking for a short-term investment plan, then this may not be the right option for you.

  • Flexibility

As the investor in ULIP, you will be given enough flexibility to choose fund options based on your preference, opt for the perfect rider benefits to enhance your policy, and change the life cover. You will have total freedom to invest your money wherever and however you want.

The flexibility that ULIP offers make it easier for the investors to switch from the previously opted investment policy to another if they ever change their mind. Investors can also change the investment variant from equities, debts, and balanced fund options.

  • Tax benefits

Who doesn’t like saving their taxes? Policies and plans that also take care of saving tax automatically become the most preferred ones. ULIPs another advantage is that it offers tax benefits.

As per Section 80C of the Income Tax Act of the year 1961, premiums paid up to rupees 1,50,000 towards ULIPs are exempt. Under Section 10 (10D) of the Income Tax Act of the year 1961, the payouts that are received after the policy maturity are also tax-exempt.

  • Liquidity

You can easily withdraw the partial accumulated amount after you have completed the five-year lock-in period. Though it is not recommended, in case of emergencies or unforeseen expenses that require attention, you can take out some percentage from the amount saved up in your ULIP.

You are allowed to withdraw the amount at multiple intervals whenever you want. The only catch is you have to finish the 5-year lock-in period.

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