COVID-19 has killed lakhs of individuals and adversely impacted the lives of people around them. Physical and financial health are the most important parts of life for everyone. In the last year and a half, the deadly waves of the coronavirus pandemic that shook the world have shown that this is true. So, your main goal should be to save money for long-term wealth.
But What Should One Do With This Money?
If you want to invest for the long term, you can do so in several ways. ULIP can be a good choice as a long-term investment. ULIP stands for Unit Linked Insurance Plan. It offers life insurance and investment that can give you growth and safety in one plan. A ULIP investment plan can let you build wealth over time and also can help your family’s financial security in the long run.
With ULIPs, you can put your money into more than one stock or bond fund at the same time. At the same time, you can also get extra bonuses if you invest for a long time, i.e. more than five years.
There are many types of ULIPs. They allow you to protect your goal in case you pass away suddenly.
Why is ULIP a Good Investment in Covid-19?
So, now that you know what a ULIP is and how it can help, here’s why this policy stands tall and stays strong, whether there’s a pandemic or not.
- It includes life insurance: Part of the premium paid for a ULIP goes towards offering life insurance coverage to the policyholder. If the holder passes away during the term, the nominee receives the sum assured. This ensures that in an untimely demise, the policyholder’s family have a financial backup to count on.
- Lightens your tax load: Two things that erode the value of your money are taxes and inflation. ULIPs can give your fund growth to keep up with inflation, and that growth is tax-free. If you invest in ULIPs, you can deduct up to Rs 1.5 lakhs from your annual taxable income. This deduction is on the premiums you pay and are subject to certain terms and conditions.
- Use as a plan for retirement: ULIPs can be a great way to save money in the long term. The longer you keep your money in the fund, the more growth you can get from it. So, ULIP plans returns can be great for saving for retirement. Many types of ULIPs offer this kind of investment.
- Provide Flexibility: ULIP is not a one-size-fits-all solution. They give users a lot of freedom and options for how to use them. You can choose how much of your money to put into debt, stocks, or hybrid funds. During the policy term, you can also change the allocation ratios and switch between funds. So, if you’re in a situation like Covid-19, you can protect your money by switching to a safer fund.
- Automated Portfolio Management: Discipline is an integral part of building wealth, and ULIP may give you a lot of ways to invest with discipline. Automated portfolio management strategies help keep your funds in the ULIP in order even when you are not looking. With these strategies, your portfolio can change automatically based on how the market is doing. This can keep the risk of your portfolio low.
Who Should Invest in a ULIP?
You can buy a ULIP if you want to save money for a long-term goal that is important for your family, especially your child. You would want to protect your financial goals, such as your child’s college education, wedding, and retirement fund.
ULIP not only helps you build a strong corpus while you’re alive, but it can also protect your family’s goal from the setback of your early demise. So, ULIPs are an excellent way to save money for your child’s future if you are in your 30s and want to do so.
These tax benefits vary based on the type of ULIP plan, the tax regime followed(old/new) and other factors. Also, remember that tax benefits are subjected to changes in tax reforms. Talk to your agent for more information regarding tax benefits on your ULIP Plan.