Vandana : In today’s economic climate, having financial stability and security is a luxury you cannot easily attain. It is not only the ever-growing inflation or other external factors, but alsothe lack of sound financial planning by individuals. Consider life insurance policies as a must-have for any financial portfolio. As per government statistics, almost 75%of the Indian population lacks any form of life insurance. Even if you discount half of them for factors like age, profession, etc., there is still a massive chunk of the population without any financial safety net for their kin. Also, as per Statista, a private provider of market data, only 3.2 percent of the Indian Population has some form of life cover.
Thus, there is a need for comprehensive life insurance policies that not only address this basic need but also provide other benefits without the need for the policyholder to shop around for different financial products. This purpose is well served by ULIPs, or Unit Linked Insurance Plans, offered by most insurance companies. They are multipurpose policies that can be made the cornerstone of the financial security you provide to your family. They can prove to be the best investment plan for you.
Let us discuss ULIPs: how they work and what makes them ideal tools for family financial planning.
WHAT ARE ULIPs?
ULIPs are a type of life insurance that serves the dual purpose of providing life cover as well as an opportunity to invest in market-linked products with the goal of wealth creation. This hybrid nature of these policies is achieved by diversion of the premiums that you pay into two portions.
One portion goes into providing your life cover for a sum assured. This is similar to any other standalone life insurance plan in that your nominee(s) is entitled to a death benefit if you die during the policy period.
The remaining portion goes into the investment vehicle of your choice. These are typically mutual funds, made of either equity, debt, or a balance of the two. There are around 5-7 funds from which you can choose one to invest your money in. These funds have varying levels of risk and return, and you can choose one that aligns with your risk appetite.
WHY YOU MUST INVEST IN ULIPs?
Now that we have a basic understanding of what ULIPs are and how they work, we can start to see why they are so coveted among investors.
Flexible
ULIPs offer great flexibility in terms of use casesas well as the ways you can invest your money. As wealth accumulation is market-linked, you might want your corpus invested in different funds at different times in your life. ULIPs allow you to switch your funds at your convenience for no extra charge (up to a certain number of switches).
Fund Management
Companies like Edelweiss Tokio Life Insurance offer fund management services for policyholders. This is an excellent feature for those who want to reap the benefits of investing in financial markets but lack the required expertise to do so successfully. Leaving the management of your fund to the company can be beneficial, as you will be able to leverage their know-how.
Tax Benefits
As ULIPs are Life Insurance plans, your premiums are tax-free under Section 80C of the Income Tax Act, 1961. In addition, the sum assured is also tax-free under section 10 (10D).
Affordable
Over the years, ULIPs have gone from being notoriously expensive to comfortably affordable. Companies like Edelweiss TokioLife Insurance offer comprehensive ULIP plans for as low as INR 1000 per month.
HOW DO ULIPs HELP IN FINANCIAL PLANNING?
You get it now, ULIPs are flexible, multipurpose insurance products that are very attractive additions to your financial portfolio. But how do they help in financial planning for your family?
● Flexible usage of corpus
The corpus you create over the long term is essentially a multipurpose fund that can be utilized in several ways. For example, it can be used to get financial assistance for any member of your family who might be ill, or it can be utilized for your child’s wedding. So there really isn’t a scenario where ULIPs cannot provide financial help. So, ULIPs are all-weather friends who are there for you, through thick and thin!
● Premium Waivers for Children
This one is crucial if you have kids. This feature, offered by companies like Edelweiss Tokio Life Insurance, helps your children by waiving off the premiums in your absence.
● You can add members of your family at a later date
Many ULIPs allow you to add your spouse and even include your child to the life insurance policy. This is because they genuinely are policies that grow with you, as per your changing needs and goals.
● Life Cover
Finally, the life coverage for a sum assured is the contingency plan your family needs in your absence. It can help them sail through tough times comfortably and ensure that they are protected when you are not around.
WHETHER YOU SHOULD HAVE ULIPs IN YOUR FINANCIAL PLANNING
So, to sum up, ULIPs are the swiss army knives of the financial world, and you will be better off having them in your arsenal. They can prove helpful in a number of scenarios, especially when you need financial assistance for your family.
Consider the Wealth Secure + plan offered by Edelweiss Tokio Life Insurance, a modern, comprehensive ULIP which is affordable yet extensive in its feature set. You can learn all about it online, check it out today!
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