ULIPs are great investment options as compared to various other investment plans due to various reasons.
Below are few reasons which are highlighted:
- Risk Appetite: When you invest in ULIPs you have the option to choose basis your risk appetite. If you are a low-risk player, then you can invest in debt funds that involve low risk. If you are a moderate risk player, then you can invest in balanced funds which can range between debt funds and equity funds. If you are a high-risk player then equity funds can be a great option. Equity funds provide good returns when the market performs well.
- Transparency: ULIPs are transparent investments. You will exactly know the charges involved and the performance of your current account.
- Flexibility: ULIPs are not just transparent but also flexible. Unlike other investment plans, you can switch between funds in ULIP. It provides you with a flexibility of choosing and switching between debt and equity funds. With ULIPs you can decide on where you want to invest. During an uncertainty you can invest in debt funds and when the market performs well you can opt for equity funds. If you plan to invest for a longer duration i.e. 10 years, you may more get opportunities to make these small alterations to reap more benefits.
- Long term investment: You may be having long-term goals like buying a house, buying a new car, opening a start-up, etc. ULIPs prove to be a good option when it comes to long-term investments because ULIPs have a 5 year lock-in period while other investment options may have a year to 3-year lock-in period. In case you decide to exit the policy after 5 years what you receive in ULIPs will be far greater than what you would get if you would have only saved that amount without investing. Your money will earn for itself once invested because of the power of compounding.
- Tax Benefits: Not all investment options provide tax benefits. Since ULIP is a life insurance product it provides tax benefits. So you save on tax and you also grow your money!
- Life cover: As mentioned above, ULIP as a product is offered by Life insurance companies. ULIPs fulfill your need for both investment and protection. Though the life cover provided by a ULIP may not be as high as that of a term plan, however, it does provide some amount of life cover.
Overall ULIPs can be an ideal investment option for your long-term financial goals. It is recommended that you check the performance of individual funds while investing in ULIPs and invest in funds that have good ratings.