Investments and side hustles are all the rage right now. Why wouldn’t it be when in the face of economic collapse, making your money work for you is the smartest solution, right?
The unpredictability of life has become a far more daunting concept since the COVID-19 pandemic. Life is fragile, and finances are unstable. In times like this, you need smart solutions that offer multiple benefits with single investments that you can monitor and control.
One such incredible solution for smart millennials is ULIPs. It is the coolest way to protect the future of your loved ones with a life insurance policy that allows you to simultaneously earn from market investments.
What are ULIPs?
Unit-linked insurance Plans, commonly referred to as ULIPs are the ultimate life insurance plans for smart millennials. They feature the basic parameters of life insurance with an added advantage that allows you to invest your money in the capital market for profits, all in one place.
Let’s understand the concept of ULIPs with a simple example.
Hypothetically, you could take out a ULIP life insurance policy for yourself, naming your parents, spouse, children, or other loved ones as beneficiaries. After careful consideration of their lifestyle and the rate of inflation, you decide on a sum assured of INR 2 crore. Assuming your age and lifestyle, you may determine the tenure of your ULIP life insurance policy for 20 years.
In the event of your unfortunate demise during the tenure of your ULIP, which is 20 years, your beneficiaries will receive INR 2 crore as the death benefit. That way you have secured the future of your loved ones with a lumpsum payout. But what about your finances during the course of your life?
That’s where ULIPs triumph over other life insurance policies. These unit-linked insurance plans allow you to allocate part of your funds in the current markets, namely equity, debt, and liquid funds. It is basically one of your side hustles that comes with an insurance policy on your life.
When you invest in ULIPs, your money is used to purchase stocks in the current market but you get to choose the kind of equity or funds in which you would like to invest. Based on your risk appetite, you can go with market-linked instruments or risk-free instruments and you can decide how much profit you would like to make from ULIPs.
What are the ULIP benefits?
ULIPs are one of the best insurance and investment plans that help you earn money during your lifespan and take care of your loved ones if they lose you. Here are some of the coolest ULIP benefits:
- You get a twofer plan with ULIPs. If an untimely death befalls you, the future of your loved ones is secured. They will receive the death benefit much like any other life insurance policy. They can use the money to make mortgage or loan payments or set up the rest of their life while they cope with the grief of losing you.
- You get to invest in incredible market-linked options with calculated risks. Your insurance provider will shortlist equity, debt, and liquid funds that have proven solid, and you can choose in which you want to invest your money. You can choose risk-free options for lower but safer returns on investment, or you can take some risks and invest in market-linked funds.
- If you are not a big risk taker but want to make big money out of your investments, you may mix and match to balance out the risks that you want to take. So, the amount of money you invest in market-linked instruments may garner more risk, but you can balance that by investing more in risk-free instruments.
- You can withdraw your profits whenever you need it during a financial crunch. After the lock-in period ends, whenever you are in a financial tight spot, instead of taking loans, you can make partial withdrawals from your profits.
- If you survive the tenure of your policy, you receive the maturity benefit. This amount is apart from the profits you make in the market. Therefore, the ULIP benefits serve as a viable savings option as well.
- You can determine a comfortable premium rate using the ULIP calculators before you invest. All you need to do is set tenure for the amount of money you want to make from market investments, the types of risk-free or market-linked instruments you prefer, and the percentage of profit you want. You can even choose how much percentage of your money goes to risk-free investments and market-linked investments individually or diversify your portfolio. If the premium rate from the ULIP calculator seems high, you can adjust the parameters and check for the premium amount that you can comfortably pay.
- Other ULIP benefits include tax exemption. Under Section 10 (10D), if the rate of premium is less than 10% of your sum assured and below INR 1.5 lacs, then you get tax benefits on ULIPs.
- The death benefit that your beneficiaries receive falls under tax exemption.
- If you survive the tenure of your ULIP, then you earn tax exemptions on the lumpsum payout that you receive after the policy matures which adds to the ULIP benefits.
- It is a safe and easy way to make more money from your life insurance investments while learning valuable tips for investing directly in the market.
ULIPs are financial tools where insurance and investments go hand in hand. You can secure your present as well as the future of your loved ones with a single investment plan.
Conclusion
As the world has evolved to account for alternative means of earning money and reaching financial goals, ULIPs serve as the ultimate option for smart financial planning. The ULIP benefits surpass those of other insurance plans for risk-takers and safe investors. You just need to identify the type of ULIPs that work best for you.
Even if you do not have a lot of experience with market investments, ULIPs are a safe bet as the insurance provider helps you make profits in viable market instruments. Not to mention, the tax exemptions on ULIP benefits, such as maturity benefits and death benefits, save you a lot more money apart from the profits you receive.
