First-time investors are often faced with the question of where to invest money in India. With the country’s financial markets teeming with several types of investments, it can be overwhelming to choose an instrument that suits your requirements and risk appetite. Some of these options even qualify as tax-saving investments, meaning that they can help you reduce your tax liability as an added advantage.
Amongst the many tax-saving investments in India, life insurance is one of the foremost option preferred by investors. If you’re unsure about where to invest money, it is always a good option to research well or you can even consult a subject matter expert to advice you. There are several kinds of insurance products that offer the benefit of insurance coupled with return on investment.
Here’s a closer look at some of these tax saving insurance plans, their features, and the benefits they offer.
1. UNIT LINKED INSURANCE PLANS (ULIPS)
A Unit Linked Insurance Plan is essentially a combination of both insurance and investment. It offers the ability to enjoy market linked returns over the long term. When you invest in a ULIP, your premium is invested in market linked funds. The charge for providing life cover is deducted monthly from the fund value.
Features of ULIPs:
Unit Linked Insurance Plans possess several characteristic features, some of which are explained below.
- Market-linked investments: The contribution that you make in a ULIP is invested in the marked linked funds. Therefore, the performance of your investment is linked directly to the market linked fund’s performance.
- Fund options and fund switching: ULIPs offer you the option to choose the type of funds to invest in. You can choose from a range of alternatives like equity funds and debt funds instruments. Additionally, if you wish to take advantage of the market’s performance, you can also choose to switch the type of funds during the term of the policy. You can either do this on your own if you are well versed with markets, take an experts advice or let the insurance provider manage the funds for you.
- Lock-in period: ULIPs come with a minimum lock-in period of five years, during which you cannot withdraw your funds. After the lock-in period has expired, you can withdraw your funds partially or completely.