3 Reasons to Choose ULIPs for Accumulation of Wealth

Posted On December 22, 2021February 5, 2022

A unit-linked insurance plan (ULIP) allows investors to invest in the market. Hence, it can enable the investors to accumulate wealth.

In this article, we will discuss 3 reasons to choose ULIPs for wealth accumulation.

One of the best options to earn huge returns is by investing money in the stock market. Investment in the stock market can allow the investor to build a significant financial corpus. However, a lot of investors don’t have the knowledge of investing in the stock market. Furthermore, many don’t have time for monitoring the portfolio constantly. A good investment option for such investors is a ULIP.

A unit-linked insurance plan provides the policyholders with the benefit of life cover as well as investments. When a person invests in a ULIP, a part of the premium is invested in different investment instruments, like equity and debt funds. The remaining amount goes for life cover.

Thus, with the help of a ULIP plan, an investor can provide financial protection to his/her family. Furthermore, the investment allows the investor to accumulate wealth that can be used to achieve various long-term goals.

Here are 3 Reasons to Choose ULIPs for Accumulation of Wealth-

It Can Allow Investors to Diversify their Portfolio

Investing entire money in one asset can be risky because in case the investment instrument fails, the investor might lose all his/her funds. Thus, in order to deal with risk, it is very important to diversify the portfolio.

Investing money in a wide variety of assets can allow the investors to earn significant returns if they stay invested for the long term while dealing with the risk. While ULIPs provide the benefit of life cover, they can also enable investors to earn good returns by investing in different funds. Therefore, investors can build a corpus while ensuring financial protection for their family.

It Allows Investors to Switch Between Funds

One of the reasons many investors opt for ULIPs is because they allow them to switch between funds. An investor can switch between multiple fund options like equity, debt, etc. Based on market conditions, investors can determine when they want to switch funds.

For instance, if the market is rising at a quick pace, then an investor can safeguard the gains by moving the funds to debt funds. Therefore, ULIPs can allow investors to gain good returns while ensuring the portfolio is stable.

Investors can also change the future premiums’ allocation based on the market conditions. However, people must research before choosing the funds. This can allow them to earn good profits.

It Provides Tax Benefits

Unit-linked insurance plans also provide tax benefits. In case of ULIPs, there are no tax implications for switching between funds.

Furthermore, the premium paid to purchase the policy can be claimed as a tax deduction. The maturity amount is also tax-free under Section 10(10D). However, the annual premium should be lower than Rs. 2.5 Lakhs.

Choose ULIPs to Accumulate Wealth

Choosing ULIPs can help investors grow wealth if they stay invested for a longer duration. It can allow them to switch between funds, provide financial protection, and save taxes.