A Unit Linked Insurance Plan (ULIP) offers you dual benefits as it provides you with an investment vehicle that puts your money to work with some market-linked investments whilst also giving you peace of mind that comes with having life insurance cover.
Choosing a ULIP saving plan is often driven by your specific investment goals and proposed timeline for getting where you want to be from a financial perspective and when you invest in a ULIP you will be opening up a potential gateway to wealth creation.
One question to consider when you are considering your options would be to work out whether it would be better to go with a ULIP over a mutual fund. Here is a look at some of the fundamental differences and advantages to consider before deciding where to put your money.
Spot the difference
A good starting point would be to look at the specific differences between a ULIP and a mutual fund. Mutual funds have been around for a lot longer than ULIP’s and they are basically an investment vehicle with a specific purpose. It is designed to offer you exposure to equities with the aim of achieving capital growth over a period of time.
By comparison, ULIPs are a financial product that consists of two specific elements, life insurance cover, and investment inequities. What you get when you invest in a ULIP is insurance against your death so that your family is provided for if you pass away unexpectedly and prematurely.
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A tax-efficient way of investing
You always have to consider how you can invest your cash in the most tax-efficient way so that you get to keep as much of your money as possible and legitimately avoid paying more tax than you have to. This is a feature that puts a ULIP ahead of a basic mutual fund.
You are permitted to make tax deductions under section 80C of the Income Tax Act and this means that the amount you invest in a ULIP is allowable as a deduction against your taxable income.
Looking to the future
It tends to follow that if you can give yourself the longest amount of time possible to achieve your financial goals you will improve your chances of enjoying better returns as your money will have had plenty of opportunities to grow in value.
On this basis, you would have to say that ULIP investments are more favorable, as you get the advantageous combination of a long-term financial wealth investment plan combined with the highly worthwhile backup of life insurance to cover you against the unexpected.
If you have a family to take care of and future plans for yourself and your children, you can use a ULIP investment vehicle to enjoy the prospect of capital appreciation via your exposure to equities and government securities along with life cover so that your family is provided for if when you are no longer around.
Mutual funds have proved to be enduringly popular and with a ULIP you get a great combination of investment and insurance. Where will your money be invested to meet your future financial aspirations and goals?
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