Many of us often ask, “why should I invest in ULIP?” Well, when the need for insurance and investment simultaneously rises, there is nothing considered to be better than savings and investment plans. If you are looking for both of these, you must opt for a Unit Linked Insurance Plan. It may be subject to the risk appetite of the buyer, and depending on the condition, he may go for traditional plans like endowment or choose aggressive plans like ULIPs.
Traditional plans are steady and come with comparatively lesser risk; nevertheless, the amount you get is also proportionate. On the other hand, the best ULIP policy is a type of life insurance that offers a considerable high return on investments along with tax benefits under Section 80C and 10(10D). However, certain things need to be understood to find the best ULIP and accumulate substantial ULIP returns. Here is a quick guide about five things to understand while choosing the best ULIPs.
- Understand What the ULIP Is
It is always better to do a lot of research about what precisely a ULIP is. A Unit Linked Insurance Plan is a combination of insurance and investments, where you can invest your hard-earned money into a list of qualified investments such as stock, bonds, or a blend of both. Though ULIP returns are incredible, you must understand that it is a life insurance policy first, and then an investment tool. The sum assured you choose must be adequate, making sure that your family’s financial future is secure. The investment part is essential undoubtedly but comes later.
- Determine Risk Appetite and Set Financial Goals
The ULIP investment returns are subject to market volatility. If you are not sure whether you can stomach certain risks or not, you first need to analyze up to what extent it can be endured. Your goal must be set by evaluating your future financial needs, i.e., for what reason you are planning to get a corpus and within what tenure. Furthermore, the financial goal must be achievable.
- The Comparison Makes it Easy to Get the Best ULIP
To get the best ULIP among an extensive list, you must compare several plans available in the market. Today, the cut-throat competition has led to offering maximum benefits combined with a single ULIP. While comparing different ULIPs, you can check which plan is offering maximum funds along with the flexibility of switching between them. Insurance premium calculators allow you to get the best quote for the best ULIP that you are looking for.
- Choose ULIP Funds Wisely or Appoint a Knowledgeable Plan Advisor
The risks are directly proportional to your investment strategy. Sizeable ULIP returns can be achieved strategizing your investments, such as where to invest and when to switch between other available funds. If you think you are not knowledgeable enough to decide, feel free to appoint a plan advisor who can help you get anticipated results. Insurers allow you to switch between different ULIP funds up to specific times, and you can avail the benefit of this if volatility is marked towards particular funds. The ratio of stocks and bonds can also be determined to minimize risks and get the anticipated return.
- Tax Benefits and Its Conditions
The premiums you pay towards your ULIP life insurance policy are eligible for tax deductions under Section 80C. Whereas, the income and other gains from the ULIP policy are tax-free under Section 10(10D) of the Income Tax Act. However, there is a specific capping above which the investment returns are taxable, and the percentage varies from 10% to 20%. In the case of Section 80C, the cover must be at least 10 times the annualized premium. If the premium is greater than 10% of the cover, the tax will be applicable up to 10% of the sum assured. Death benefits under this life insurance policy are entirely tax-free.
To conclude, getting the best ULIP isn’t tricky. All you need to do is do proper research and understand what you can get by investing how much. Once you determine your goals and the investment strategy, any ULIP can suit your needs best!