As an investor and a taxpayer, you have probably wondered: "What is ULIP" A Unit Linked Insurance Plan (ULIP) is one of the many tax-saving investment options available for investors. It is a life insurance policy and an investment plan rolled into one product. The key to understanding the answer to the question “What is a ULIP?” lies in how the premium is used. It is used to provide a life insurance cover and it is invested in the financial market, so your investment can give market-linked returns over the course of the policy duration.
Having understood "what is a ULIP?" the next question that you probably have is this: "Why should I invest in a ULIP?" Let us look at this.
Why should I invest in a ULIP?
Investing in ULIPs can help you meet various life goals, both in the short term and the long term. You can experience many benefits by investing in ULIPs. These benefits include:
• Disciplined and regular savings
• Financial assistance through insurance
• Goal-based financial planning
• Flexibility in investing
• Tax-free withdrawals and tax benefits, subject to provisions of Income Tax Act, 1961.
Now that you have the answer to your question “Why should I invest in a ULIP?”, you need to look at another important aspects before investing in a ULIP. This element is the Benefit Illustration, which accompanies every Unit Linked Insurance Plan. The Insurance Regulatory and Development Authority of India (IRDAI) has made it compulsory for all insurers to provide a Benefit Illustration (BI) to investors who buy ULIPs.