Is Your Money Working as Hard as You Are? How ULIP Plans Offer the Best of Both Worlds
Each day, you put your efforts into earning money. You may have spent more hours at work, run a business of your own, or just taken care of your family. However, the question still remains — have you ever thought that your money is not working as hard as you are?
We save money in banks, invest in fixed deposits, or even keep cash at home. But sometimes, these options don’t give us enough in return. That’s where ULIP plans come in.
Let’s understand how ULIPs work and why they are called the “best of both worlds”.
What is a ULIP Plan?
ULIP or the Unit Linked Insurance Plan (ULIP) is a hybrid of investment and insurance.
Let me clear the picture for you:
● You get a choice of equity funds, debt funds, or a balanced mix.
● The returns keep accruing with time, and the family continues to be insured.
Thus, you get two benefits in one plan:
Protection (Life Insurance)
Growth (Investment Returns)
Why Do People Call ULIP Plans the “Best of Both Worlds”?
ULIP plans are special because they give you:
● Financial security for your family
● A chance to grow your wealth over time
Most other financial products give only one benefit. For example:
● A savings account is safe, but returns are low.
● A stock market investment may grow fast, but it has risks and no insurance.
● Life insurance protects your family, but it doesn’t increase your money much.
With a ULIP plan, you don’t have to choose between safety and growth — you get both.
How Does a ULIP Plan Work?
Here’s how simple it is:
You buy a ULIP policy from an insurance company.
You decide how much money you want to pay. This is called premium.
Your premium is divided into two parts:
○ One part goes to insurance coverage.
○ The rest is invested in funds of your choice.
Among equity funds, mix or debt funds, you can opt for the one that best suits you.
Eventually, your money grows, keeping your family protected.
Who Should Invest in a ULIP?
ULIP plans are great for people who:
● Want to grow their money in the long term
● Want to protect their family’s future
● Want tax benefits
● Want flexibility to switch between investment options
● Are okay with a lock-in period of 5 years
Whether you are in your 20s or 50s, ULIP plans can work for you.
Benefits of ULIP Plans
1. Life Insurance Cover
If something happens to you, your family gets a lump sum amount. This gives them financial support when they need it most.
2. Wealth Creation
By investing in funds, you can increase your savings over a period of time. The longer you stay invested, the more you will be able to harvest your money's growth.
3. Tax Benefits
ULIPs are very efficient in providing tax exemptions under Section 80C of the Income Tax Act. The profits will also be tax-free if the conditions are fulfilled.
4. Switching Funds
Most ULIPs provide an option of carrying over a few free switches every year, so you can easily move your money between different funds (equity, debt, balanced) as per the market conditions.
5. Long-Term Goals
ULIP plans are great if you are saving for:
● Your child’s education: Saving for child’s education needs a longer horizon and thus ULIPs are an ideal choice for this purpose.
● Retirement: ULIP is also a pension plan when you invest money in equity and debt to accumulate a corpus and at maturity you get a regular income serving as the pension during your retirement.
● Buying a house: If not the entire cost of the house, but ULIPs can help you accumulate funds for at least the down payment on your new house.
These are some reasons to stay committed and disciplined to investing
Are ULIP Plans Safe?
IRDAI (Insurance Regulatory and Development Authority of India) regulates all ULIPs. This means your money is safe and suitably managed.
You can also choose funds of low risk or high growth. If you want less risk, you can opt for debt or balanced funds.
Things to Consider
Here are a few things you need to keep in mind before investing in a ULIP plan:
Lock-in Period
ULIPs have to be locked in for a minimum period of 5 years. So, invest only if you can remain invested for such a period.
Charges
ULIPs have some charges like:
● Premium allocation charges
● Fund management fees
● Policy administration charges
But most modern ULIPs have very low charges, and they reduce over time.
Market Risks
Since part of your money is invested in the market, the value may go up or down. But you can choose low-risk funds if you prefer safety.
Real-Life Example
Let’s say you are 30 years old. You decide to invest ₹5,000 per month in a ULIP plan.
● ₹1,000 goes for life cover.
● ₹4,000 is invested in equity or balanced funds.
In 20 years, you would have invested ₹12 lakhs.
If the average return is 10% per year, your money can grow to ₹30+ lakhs (just an estimate). Plus, your family is protected with life insurance the whole time.
Why ULIP is a Smart Choice Today?
In today’s world, just saving money is not enough. You need to grow your money smartly while also keeping your loved ones safe.
The ULIP provides you with these very features.
● It grows your small monthly savings into much wealth over time.
● It makes sure that your family is secure, whatever the circumstances.
● It also allows some changes in investment, reflecting life changes.
Final Thoughts
You work hard every day by putting in your best at work and home. But is money doing its best?
ULIP plans are excellent choices for motivating money to work just as hard for you as you work for protecting the interest of your loved ones and building wealth for your future.
Thus, if you are considering an intelligent and safe investment, then maybe ULIP is the plan you need.
Disclaimer: This article is published in association with PNN and not created by TNM Editorial.