A ULIP policy can be a game-changer for the investment market. After the re-emergence of a ULIP product in the market, it has attracted many investors for a lot of reasons. Since it is an investment product, many of you might choose a ULIP policy for its ability to grow your money into a gigantic corpus. A ULIP insurance policy is a unique financial product that can club investment as well as insurance under a single integrated plan, while you get to build a large corpus at the same time. If your primary objective to purchase a ULIP policy is to generate more money, let’s go through how you can do so with these top four tips mentioned below:
- Stay invested for a long time
Due to the lock-in period of five years, a ULIP policy can serve as a long-term investment. With the long policy duration, you might be able to meet your life goals, such as buying a new house or a car, planning your child’s dream wedding, and so on with adequate funds. Since you might not be able to withdraw your funds during the on-going tenure of the ULIP policy, your money can grow over the due course.
- Reap the benefits of the power of compounding
Although a ULIP policy can allow you to grow your money, you should invest in it at a young age. As a young adult, you might have a significant amount of time to build a substantial corpus to safeguard your future. Moreover, the power of compounding can play a crucial role at a young age for the generation of your wealth. Compounding can be a great way to gain interest on your returns, which can double your wealth.
- Diversify your investment portfolio
A ULIP policy is a unique investment product that can allow you to diversify your portfolio. Under a ULIP policy, you can avail the switching feature that can let you shift between equity funds and debt funds as well as secure your invested capital from market fluctuations. The switching feature might not charge any additional charges to generate ULIP returns or tax implication. Additionally, your insurer can offer you with an automatic switching feature to rebalance your investment portfolio as you grow older.
- Optimise tax benefits
Tax benefits can be an essential part of the ULIP policy. The ULIP tax benefits can be applicable on the premium as well as the maturity proceeds according to Section 80C and Section 10(10D) of the Income Tax Act, 1961. Under a ULIP policy, the applicable tax benefits can be as follows:
Based on Section 80C of the Income Tax Act, 1961, you can claim a deduction up to Rs. 1,50,000 on your taxable income.
- Maturity proceeds
The maturity proceeds provided to the nominees can be tax-free as stated under Section 10(10D) of the Income Tax Act, 1961.
To conclude, a ULIP can be an effective tool that not only enhances your wealth but also offers relatively high returns. Although you can build a substantial corpus with a ULIP policy, you should invest in it at a young age. The chances of growth of funds can be more if you begin a ULIP investment at a young age to reap the benefits. In simple terms, the earlier the investment, the higher the generation of funds.