As a result of the increasing expenses and the uncertain nature of life, a large number of citizens across the country have started making smart investments. Smart investments can not only help you secure your future but also allow you to achieve your financial goals at different stages of your life with ease. One of the most contemporary investment options in today’s times is Unit-Linked Insurance Plans (ULIPs). When you purchase a ULIP plan, a part of your premium is utilized for providing insurance coverage, whereas the remaining portion of your premium is invested in funds according to your choice.
Your financial needs may vary at different stages of your life. Therefore, depending upon your risk-appetite and your financial goal, you can choose to invest your money in different funds. Let us have a quick look at the ULIP funds typically categorized on the basis of risk and investment objective.
These ULIPs invest primarily in company stocks and equities. The risk associated with equity funds is high and hence it is best suited for investors with a high risk appetite. The primary objective of equity funds is capital appreciation. If you are a young individual with less financial obligations, you can afford to take risks while making investments. As your risk appetite is higher at such a young age, your ULIP investment should be heavy on equity funds, i.e. around 75-80% of equity funds.
Income, fixed-interest and Bond Funds
In this case, the funds will be invested in fixed income instruments, government securities and corporate bonds. These ULIP funds offer medium risk and reward.
Balanced or Asset Allocation Funds
These ULIP funds is a combination of equity investment and fixed interest instruments. It is considered as the most stable ULIP investment. The amount that you invest is distributed between high-risk equities, such as company stocks, and lower-risk fixed-income instruments.
The risk associated with cash funds, also known as liquid Funds is very low. In this case, your investment amount will be directed towards low-risk money and short-term market instruments, such as cash and bank deposits, commercial paper and treasury bills. People with a very low risk appetite can consider investing in cash funds.
Another major advantage of investing in ULIP is that the ULIP plan also gives you the flexibility to switch between funds. This can help you can limit your exposure to equity funds during market downturns, and put your money in safer debt instruments. Moreover, since ULIPs also provide life insurance coverage, you get the flexibility of choosing the sum assured at the beginning of the policy.
ULIPs also come with several other features such as partial withdrawals, multiple fund options and different premium payment options. You can easily make tax-free partial withdrawals once the lock-in period of five year is completed. Therefore, to meet your financial goals, you can opt for partial withdrawal of funds at any stage of your life. Under section 80c of the Income Tax Act, you can avail tax benefits on the premiums paid towards this policy. In addition to that, ULIPs can also help you develop saving habits and be more financially disciplined.
Nowadays, you can easily avail a ULIP plan with the help of leading online insurance providers. The ULIP plan returns can help you meet you financial goals with ease. Make sure that you compare various insurance providers and the ULIP policies before making the final decision. This will help you settle for a ULIP plan that best suits your needs. In case of any query, you must get it resolved by consulting the insurer. This will help you avoid any inconvenience in the later stage.