Business & Economy

How Insurance Plans Can Make Your Financial Portfolio Robust

By A Correspondent

Mumbai, June 19, 2020

Some things in life are beyond your control. Current scenarios depict that life is uncertain. The entire nation is facing an economic crisis. Businesses in India have various challenges to deal with, and the healthcare sector is overwhelmed.

With so much happening around you, the importance of insurance is resurfacing, especially during these unforeseen circumstances. Also, making new investments when the money is tight can be a little tricky. But what if we tell you there is an insurance instrument that allows you to make investments as well?

The unit linked insurance plans (ULIPs) are primarily an insurance product. The policy offers dual benefits of life insurance cover and facility to build your wealth through investments. Here, a part of the premiums paid is used for life insurance cover; whereas the remaining amount is invested in funds of your choice. ULIPs give you the liberty to invest in debt funds, equity-oriented funds, or a combination of the two, depending on your risk appetite.

More so, having a ULIP investment under your name can make your financial portfolio robust. Are you wondering how that is possible? Well, we are here to tell you just that.

1. Protection to loved ones

During a pandemic-like situation, your loved ones will be emotionally devastated if anything were to happen to you. Moreover, if you are the sole income earner in the family, your death can throw them in a financial turmoil. Hence, it is necessary that you have an insurance policy that safeguards your loved ones, even in your absence.

As mentioned earlier, ULIP is primarily an insurance instrument. A portion of the premiums you pay towards the policy is used for life insurance cover. So, in case of your untimely death during the policy tenure, your dependents will receive the death benefits under it. That way, your loved ones do not have to face any financial crunch in your absence and continue to lead a secure life.

2. Wealth creation

Another benefit of ULIPs is that it helps you build your wealth over time. Here, the remaining amount of the premiums is used to invest in market-linked funds. You (the investors) have the liberty to invest in funds depending on your risk appetite.

For those with a low-risk appetite, you can invest in debt funds. People with a high-risk appetite can invest in equity-oriented funds. Moreover, ULIPs provide a facility to switch between the funds as and when needed, depending on the market performance.

In fact, ULIPs are known to be goal-based investments. So, whether you want to save for your retirement, child’s education, wealth creation, or to buy a new house/car, ULIP investments have you covered.

3. Tax benefits

Apart from the above benefits, ULIPs also offer tax benefits. The premiums paid towards the policy can be claimed for tax deductions under Section 80C of the Income Tax Act. Also, the death and maturity benefits received on the policy are tax-free under Section 10(10D).

To Sum It Up!

As we learn the norms of the new normal, protecting yourself and your loved ones remains constant. In fact, you can also explore different investment options such as mutual funds, SIPs, and FDs to extend your investment horizon. You can also research ULIP vs Mutual Funds to understand the difference between the two and make a better investment decision.

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