You have a lot of questions on your mind as a novice investor. A ULIP is a fantastic alternative for novice investors out of the many available options on the market. ULIPs require competent management, just like any other investment.
ULIP: What is it?
A unit-linked insurance plan is a plan that offers you investment and insurance benefits at the same time. You get to enjoy consistent returns from your investment, while the insurance provides life cover to you and your loved ones in emergencies. Additionally, ULIPs qualify for tax breaks. As per the old tax regime, premiums of up to Rs 1.5 lakh are eligible for tax deduction under Section 80C. Maturity benefits are also eligible under Section 10(10D) of the Income Tax Act. This has changed to Rs 2.5 lakh under the new tax regime. They are among the best investments not subject to Long Term Capital Gains tax.
You can always choose plans that can be an excellent alternative for you if you’re seeking a ULIP that offers a variety of options for benefits and investments. It provides seven possibilities for unit-linked funds to invest in, along with three protection-based plan options. Your investment can be split among any, all, or a mix of these funds.
ULIPs have become very popular because they offer the benefits of tax savings, investment, and insurance. Did you know? Learning how to handle ULIP finances is crucial for getting the most out of ULIPs.
Set a course for your life:
You could have various financial objectives, such as funding your child’s college tuition, purchasing real estate, travelling abroad, etc. You must keep these objectives in mind to consider how to handle your ULIP assets. Your fund distributions should align with the purpose. For instance, it is standard practice for allocations to be heavier on equity towards the beginning and middle of the period. When the objective is getting closer to completion, you can move to safer investments because one of the advantages of ULIP is that it gives you the flexibility to transfer from equity to debt at nearly any moment.
Determine your risk tolerance:
More significant risks can produce higher profits, but this is only sometimes the case. You must determine whether you can tolerate risk and, if so, how much trouble you can tolerate. Consider gradually investing more equity if you anticipate an ongoing rise in your income over time. Balanced funds are an option if you’d want a more constant and secure income flow.
Investing in a variety of asset types is asset allocation. The ability to spread your risks and reduce losses compared to investing in only one asset class is one of the main advantages of ULIPs. Since ULIPs typically have a 40% allocation to equity funds, they are considered comparatively safer. However, if your risk tolerance is adequate, you can choose a high-risk, high-return portfolio. Calculate the allocations’ rough risk-to-return ratio and make an effort to balance them in accordance.
- Emerging Leaders Equity Fund, Equity II Fund, and India Multi-Cap Equity Fund
- Balanced Plus Fund Liquid Fund Debt Fund
- Assessment of Charges
The insurance company will first subtract the premium before being allocated funds. This amount is deducted to pay various fees, such as mortality, premium allocation, policy administration, and fund management fees. When the policy reaches maturity, some ULIPs even provide a return of the mortality charge. You may get a solid understanding of how your money is being spent by calculating these fees. Check out the ULIP calculator to understand better.
Keep an eye on the market for updates:
You get the fund value when the policy matures. You must monitor market developments and fund performance to ensure that this value is high. With superior decision-making, you can determine when to take higher risks and when to play it safe while changing your allocations. ULIP demises benefits are equal to the greater of the fund value or the sum assured. It is advisable to check out the ULIP tax benefits before you choose any plans. A higher fund value can guarantee more monetary stability for your family after your passing.
You can get the most out of your ULIP assets if you learn how to manage them properly. A good ULIP fund and competent administration are just the beginnings of new investors’ improved financial planning and discipline. Learn more about ULIP and ULIP tax benefits before you opt for any plans.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.