Is ULIP a Good Investment Option During COVID-19?

COVID-19 has claimed over 40 lakh lives and infected crores. The two aspects of life, physical and financial health are everyone’s top priority. The deadly waves of the coronavirus pandemic that shook the world have reinforced this notion in the last one and a half years.

Thus, saving money for long-term wealth should become your priority. But, where to put this money?

You have multiple investment options if you want to invest for the long term in India. However, rarely anything beats a ULIP as a long-term investment option. ULIP stands for Unit Linked Insurance Plan. It is a type of life insurance that combines growth and safety in a single plan. A ULIP investment plan allows you to build wealth over a long period while also adding to your family’s long-term financial security.

ULIPs allow you to invest in multiple equities and debt funds at the same time with a single investment. At the same time, you also have the opportunity to receive added bonuses for investing over a long period, say more than five years.

Additionally, ULIP investment gives you the option to protect your goal from your sudden demise.

Why ULIP is a Good Investment During Covid-19?

So now that you have looked upon what actually is a ULIP and how it can help, here is why this policy stands tall and holds its ground in this situation of a pandemic or not.

1. It Covers Life Insurance

Part of the premium given in the ULIP goes for the life insurance cover that is the ULIP involves death benefit. The nominee will get the sum assured if the holder dies within the term. The amount is generally 105% of the annual premium amount paid by the insured. Since now Covid-19 is also included in life insurance, live coverage’s significance cannot be understated.

2. Reduces Your Tax Burden

Taxes and inflation are the two factors eating up the value of your wealth. While ULIP provide growth to your fund to beat inflation, they also provide it tax-free. You can claim a deduction of up to Rs 1.5 lakhs from your taxable income every year if you are investing as much in ULIPs. Also, any withdrawals from the plan after five years are exempt from tax.

3. Use as A Retirement Plan

ULIPs are a great long-term investment plan. The longer you stay invested the more fund growth you can enjoy. Thus, ULIPs also make great retirement investment plans. ULIPs offer Century Option for such investment.

Under the Century option, you can continue the ULIP plan till 100 years of age. So, if you start at 30, and invest till 60, you can retire with a well-endowed corpus in 30 years. After 60 starts withdrawing the part of the corpus as a pension income. Coming from a ULIP this withdrawal will be completely tax-free.

4. Provide Flexibility

ULIP does not follow a one-size-fits-all approach. They provide users with a high level of customization and flexibility. You can choose to invest in debt, equity or hybrid funds in a ratio of your preference. Not only this, but you can also change the allocation ratios and switch between funds during the policy term. So, when you face a situation like Covid-19, you can safeguard your funds by switching to safer fund options.

5. Automated Portfolio Management

Discipline is an important factor in wealth generation, and ULIP provide you with ample features to build a disciplined investment approach. Automated portfolio management strategies help you keep your funds disciplined in the ULIP even when you are not looking. These strategies will automatically adjust your portfolio as per the market performance and keep the portfolio risk low.

Learn these 4 go-to ways of portfolio management in ULIPs.

Who Should Buy the ULIP?

You can buy a ULIP if you want to invest in an important long-term goal of your family, especially the child. You would want to protect your financial goals like child’s higher education and marriage and the retirement corpus for your spouse.

ULIP not only helps you build a strong corpus while you are alive, but it can also protect your family’s goal from the setback of your early death. So, if you are in your 30s and want to save for your child’s future, ULIPs are a good investment option for you.

Certain ULIPs have the option of continuing the plan till the age of 100. Since partial withdrawals from ULIP are tax-exempt after five years, ULIP will be a great option to invest in a tax-free pension.