Published On : Sat, Jul 25th, 2020

Why ULIP Is One of the Best Options for Long-Term Wealth Creation


Everyone dreams of attaining financial stability in life. To achieve the said goal, they make several investments to build their wealth over time. The unit linked insurance plan (ULIP) is one such investment strategy that helps people in long-term wealth creation. Let us look at it in detail.

What is ULIP plan

ULIP or Unit Linked Insurance Plan is an insurance product that offers the benefits of investments as well. The policy provides dual benefits of life insurance coverage and wealth creation through market-linked investments. You can invest in a variety of funds such as debt funds, equity-oriented funds, or a combination of the two.

Why ULIP is an ideal option for long-term wealth creation

The following pointers will help you understand why you should invest in ULIPs for long-term wealth creation –

  • It is necessary that you invest consistently to build your wealth over time. It also means that you should not withdraw money from your investments constantly. When it comes to ULIPs, the policy comes with a five-year lock-in period. During this time, investors cannot make any withdrawals from the investments. Once the lock-in period ends, they can only make partial withdrawals as and when needed.
  • As mentioned earlier, ULIPs allow you to invest in funds of your choice. Along with this, it also provides the liberty to switch between the funds. In case you feel that your investment portfolio is not earning satisfactory returns, you can switch between the funds with this facility – from debt to equity and vice versa. Thus, you can keep readjusting your portfolio to yield higher ULIP returns in 10 years.
  • ULIPs also offer tax benefits to investors. The premiums paid towards the policy can be claimed for tax deductions under Section 80C of the old tax regime. In addition, the maturity and death benefits received are tax-free under Section 10(10D) of the Income Tax Act, 1961.
  • To enhance the scope of the ULIP investment, insurers also offer add-on covers. By paying additional premiums, you can enjoy the advantage of extended protection under the policy.

We know that there are multiple investment strategies available in the market. Choosing one plan can be a daunting task. If you are wondering how much premiums you need to pay, use the ULIP calculator. The tool helps determine the premium amount and estimates the return the policy will generate upon maturity.

Also, ULIPs are goal-based investments. To choose the right ULIP investment, you should know your future financial goals. Moreover, you need to evaluate your current financial situation and expenses. All these factors will help you choose the right ULIP so that you can align the investment to accomplish your future goals.

On the other hand, a sound financial plan should also consider the security of your loved ones in your absence. Since ULIPs are primarily an insurance instrument, the policy offers financial protection to your loved ones through life insurance coverage.That way, any unforeseen medical expenses or loss of income due to your death will not put the family in a financial turmoil. ULIPs are ideal for any investors who are looking to protect their loved ones financially and build wealth over time.

By now, we sure hope you have understood that ULIP plans are a good investment option. It is especially true if you are looking to build your wealth over time and protect your loved ones with life insurance as well.