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Importance Of ULIP During COVID-19 Pandemic

ULIP Investment during COVID-19

Importance Of ULIP During COVID-19 Pandemic


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November 21, 2020

By : Bajaj Allianz Life

During the ongoing pandemic, there is no better gift to gift to your loved ones than financial security. Going directly for an insurance policy that covers COVID-19 may appear to be one of your best bet, but there are a slew of pre-existing financial products that can give you the benefits you need to stay secure during this time and after. One such financial product is ULIP investments.

 

What is ULIP investment?

 

Unit linked insurance plans (ULIP) are investment options that also give you the benefit of a life cover. ULIP plans provide the dual advantage of insurance and market linked returns from investment. It works by investing your premiums into the type of fund of your choice while also protecting you with a life cover. During the pandemic, ULIP plans offer unique advantages that gives you and your family security and your financial portfolio an opportunity of wealth creation. Here are some of these benefits.

1. Market Linked Returns

ULIP plans may also serve the purpose of wealth creation. One’s premiums can be invested in equity funds, debt funds, or a combination of both One simply picks the funds available in the product they would prefer to invest in and you are good to go. Market-linked returns may tend to perform better due to time horizon and different market cycles and power of compounding that happens over the years. However, with the right investment horizon, the same volatility can lead to long term gains that help you beat inflation, where the growing living costs eat into your profits. During a pandemic, staying invested in your ULIP policy may help you compound your returns.

2. Flexibility in Investments

Once you have decided your funds you want to invest in your ULIP, these choices are not set in stone. Funds can be changed to one’s liking or you can rely on your insurance company’s automatic switching option (if available as per product conditions). You have the option to switch from debt to equity or vice versa as and when you see fit. You can keep a watch on the market and make your moves between funds strategically or seek advice from a subject matter expert who can help you with the decision-making.

ULIP benefits may allow you to maximize your returns even during trying times such as the ongoing pandemic.

3. Tax Benefits of ULIPs

Another advantage of ULIPs is that ULIP plans are free from LTCG tax and are eligible for tax deductions under section 80C while the maturity benefit in a ULIP plan or death benefit is tax free under section 10 (10D) of the Income Tax Act,1961, as per the289 provisions stated therein.

 

Conclusion

 

Managing your finances during a pandemic to protect your savings and grow your wealth is tricky. Many people hop on the train of panic buying life insurance by looking specifically for an insurance plan that covers COVID-19. Fortunately, financial products like ULIP plans offer the dual advantage of investment and protection making them one of the preferred place to park your money during these trying times. You also have the option to manually switch your funds, or you may ask your insurance provider to automatically do so at regular intervals in line with product terms and conditions.

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The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.