5 Reasons You Should Consider ULIP to Avoid Equity Market Risks

2024-08-02

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Every now and then equity markets turn too volatile for individual investors, pushing them to seek safety. You would also notice that equity markets tend to turn upside down when you are also facing trouble with business and employment.

Of course, equity markets are supposed to be the reflection of the true market situation on the ground. That is why some of your total investments must stay in safe instruments and some into those instruments which let you switch between equity and fixed income.

Unit Linked Insurance Plans are one of a kind investment which gives you the opportunity for both, and ULIPs do it with the maximum tax efficiency possible for any investment. But, that’s not all; the best ULIPs give you far more than just tax-efficient investment options.

Here are five reasons ULIPs are better as a safe investment:

1. Invest with Safe Strategies

One of the best features of ULIPs is that you can use proven investment strategies to allocate your funds. You can use different investment strategies for different purposes like growth, safety or simply to maintain a specific asset allocation.

Once you choose a strategy you can continue investing normally, and the fund managers will make sure your portfolio follows the selected strategy. One of the popular strategies with the investors in Invest 4G plan is Return Protector Option. Here’s how it works:

You can fix the return percentage for your high-risk portfolio, say at 10%. Every time your high-risk portfolio value increases by 10%, the growth will be transferred to a liquid fund. For example, assume your total investment in the equity folio is Rs. 1 lakh, and your folio grows to Rs. 1.1 lakhs. The extra Rs. 10,000 will be transferred from the equity funds to a liquid fund, securing your return on investment.

You can use other similar strategies to safely earn returns in ULIP regardless of market movements.

2. Option to Switch between Debt and Equity

You know that ULIP investments help you save tax under section 80C. However, what you may not know is that ULIP is the only way to invest in market-linked fixed income securities and save tax. If you are looking to generate a regular income, you can switch your entire corpus to liquid fund and withdraw systematically.

All other fixed income instruments which let you save tax, offer a fixed rate of return with little chance of earning any better. But, with unit-linked insurance plans, you can invest in top-rated corporate and government bonds, grow your money steadily and still enjoy section 80C.

Plus, nothing will stop you from investing a little in equity funds when the opportunity is good. This too, without causing any capital gains if you move your money from debt funds to equity funds.

3. Boost Your Portfolio Value in the Long Run

ULIP plans like Invest 4G from Canara HSBC Life Insurance have the option of unit additions for long-term serious investors. As a safe investor, if you stay disciplined with your ULIP investments, insurer adds bonus units to your portfolio.

ULIPs are the only investments which have this option. This is also why ULIPs like Invest 4G are one of the best investments for accumulating wealth and retirement corpus.

4. Invest & Withdraw Systematically

If you are salaried the easiest way for you to invest is in a monthly mode. However, if you invest every month in any other safe investment, you are likely to go through a maze of taxes. In ULIP, you can invest in any mode, even top-up at times when you have extra cash, and still enjoy tax savings and zero tax on maturity value.

Same applies to your partial withdrawals from the plan. Regular income or partial withdrawal from most other debt instruments is taxable. However, with a ULIP you can simply start a systematic monthly withdrawal without worrying about your tax liability.

5. Your Goal Is Safe No Matter What

So far as you are investing in your financial goal you are bound to achieve it. Your family has many financial goals which they must achieve even if you cannot be there to invest in it. ULIPs can help you ensure that your family can fulfil these goals even in the event of your untimely demise.

ULIPs have an inherent life cover associated with the investment. When you start investing in a ULIP, you choose a goal value for your investment. This goal value becomes the sum assured of the inbuilt life cover.

As your invested money grows in the ULIP, the life cover keeps reducing. Thus, in case you meet the ultimate fate before reaching the goal, the different is fulfilled by the life cover. So, your family can still meet their goals.

A Truly Versatile Investment

ULIPs are very flexible, convenient and goal-oriented life insurance investments, especially for safe investors. If you are one of those investors who usually like to avoid equity market risk, ULIP is one of those investments which can give you - the comfort of fixed-income investment, and tax-efficient returns.

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