Why ULIP Plans are the Best Way to Insure your Life

Insurance policy are an essential for living a stress free life. An insurance policy ensures that your loved ones are taken care of financially if and when you’re not around to take care of them. You pay a monthly premium to your insurer for the term of your insurance and on maturity you receive a sizable amount. But there are also numerous plans that double as an endowment policy too.

An endowment policy or money back insurance policy is a life insurance policy that offers the dual benefit of insurance and monetary returns at regular intervals. A money back insurance plan is the perfect blend of insurance and savings elements that gives assured returns. This makes this type of life insurance very popular among investors. All insurance companies have a variant of money back policy with varying premiums. Some plans return money every five years, some skewed towards the end of the term and some at other specified dates. All these options can confuse the customer a lot.

A money back policy provides life insurance cover for a specific period. During the term of the policy, the insured receives tax-free, fixed proportions of the sum assured at regular intervals. On maturity i.e. on surviving the entire term of the policy, the insured receives the balance portion of the sum assured, if any, plus the bonus addition for the term of the policy, if any, or the value of the investments. In the event of death of the insured during the term of the policy, the nominee still receives the entire sum assured (even if the insured had received fixed portions of the sum assured), plus the bonus addition, if any.

Unit Linked Insurance Plans or ULIP plans are a great policy option that ensures regular returns. ULIP plans are life insurance policies attached to investments in equity or debt. In recent times ULIPs have been selling like hotcakes because of the attractive packages and the even more attractive returns they offer for their investors. Banks have started reducing their charges for these policies, making this the best time to invest in them.

ULIPs are very similar to Systematic Investment Plans (SIP). In SIP an investor invests regularly on a monthly or quarterly basis without worrying about the stock market being up or down. In ULIPs the investor invests his money on a quarterly or half-yearly basis.

In recent times insurance providers are offering even more perks with ULIP plans. They give discounts and are selling these policies at the lowest rates, making this the best time to invest in ULIPs. This makes ULIPs the best money back policy to invest in.

How you can create wealth by investing in tax saving plans

People invest in endowment plans because they are a good investment opportunity; they want to save money for their future plans, their children, their education etc. But one of the biggest benefits of an endowment plan is that they are a great way to save tax. Under Section 80C of the Income Tax Act, the government does not levy a tax on the money you invest or that goes into your insurance plans or endowment plans.

Tax saving measures can help you save an enormous amount of money. As important it is to invest in funds, it is also imperative to save money. And, claiming tax deductions is one of the ways for doing the latter. Because, the money you save from tax deductions could be further invested into equity or other long-term funds to grow your wealth.

ULIPs or unit linked insurance plans are a great way to invest your money while at the same time insuring yourself. Here’s how a ULIP plan works, the premium that the policy holder pays are divided into two parts, one goes to the life insurance and the other goes to mutual funds as an investment. A ULIP holder has the option of either investing in equity or in debt. An aggressive policyholder will choose to invest his money in equity while a conservative policyholder might choose to invest his money in debt. The money is invested during the term of the policy which may range between 5 to 15 years.

Apart from ULIPs the government has devised a number of plans and schemes to help people save on their income tax. These tax savings plans will help you save money and in turn create wealth. Some of these savings plans are, the public provident fund (PPF), the Rajiv Gandhi Equity Saving scheme, the voluntary provident fund, national saving certificates and the Sukanya Samridhi account.