The reality is that staying financially fit in the long run is a very simple task and all it requires is mindset changes and right investments that can get you on the path towards financial fitness. However, a successful investment depends on the series of decisions made in sync with the overall financial goals of the investor. Right from determining the objectives of your investment to creating financial plans which accordingly contribute to the success of any investment.
For everyone, financial security of their families is the foremost financial requirement. We are now in the time where new-age unit linked plans (ULIP) not only easily provide financial protection in your absence but also cater to your living benefits. Living benefits plans are insurance policies that provide financial benefit while the policyholder is still alive and help them in meeting their important life goals such as child’s education, worry free retirement for your golden years, marriage, buying dream home etc. If one plans and invests early in a well-organised manner, he/she will have fewer worries about finances not just post retirement but also during the working years.
Here are some of the living benefits that you get by investing in ULIPs:
Creation of Long Term Wealth
Everyone has goals for themselves and every goal needs a backing, primarily financial. Investing in ULIPs helps you create a corpus over a period of time and can be customized according to the insured person’s requirements and provides the best for both – investment and protection. As a matter of fact, ULIPs are the perfect go-to option for people who need a financial backing for each goal. Thanks to the power of compounding due to which investment in equities for a long term allows money to grow far higher ensuring ample future savings. These plans are highly recommended for the people between the age group of 25-40, once they have settled and can start investing a part of their income towards future goals. The wealth created by investing in ULIPs will serve you in achieving your future financial goals such as education of your child, buying a car or home, retirement plans or other goals of your life.
Widens Risk Protection Net
Critical illness and disabilities are getting common worldwide and is a large threat to our family’s security. In such a case, it not only takes your savings for meeting the treatment costs but also wrecks your ability to earn a regular income. But the good news is that these risks can be covered with the help of riders that are attached to your policy. The riders provide lump sum pay-outs during emergencies such as onset of critical illness, provided certain conditions are met. Thus, in one master stroke you create a wide financial security net for your family so that the growth of money to meet various life goals is not impacted by these emergencies.
Encourage Goal-Based Savings
The longer is your policy term, the greater are the benefits. There is a lock-in period of 5 years applicable on ULIP plans, ensuring disciplined savings every month. However, the policyholder gets rewarded for staying invested for a period of at least 10 years and beyond. This effectively means that you end up saving more for your life goals. Also, ULIPs allow you to make investment as per your goals in life. You can select and switch funds as you plan for your child’s education or your retirement during your investment journey.
Offers Tax Benefits
# Tax benefit on investment- The investment made in ULIPs can be claimed as a deduction under section 80C of the Income Tax Act, 1961. In order to save more money in ULIP investment, the premiums that are paid towards the policy are deducted up to Rs 1,50,000 on taxable income. The tax deduction available is up to 10% of the sum assured or annual premium, whichever is lower, subject to a maximum limit of Rs 1,50,000. But do remember to regularly pay the premiums and continue your ULIP plan to avail these tax benefits. If the ULIP is discontinued before 2 years, tax benefits will not be allowed.
# Tax benefit on withdrawal/ Maturity – The second form of tax advantage that ULIPs offer is found under section 10(10D) of the Income Tax Act, 1961. The matured amount paid is tax free.