Here’s why to have Ulip’s three-pronged advantages

You need life insurance to provide financial protection to your family and to create wealth during your working years and what better than Ulips to provide you for both your key needs.

Unit Linked Insurance Plans (Ulips) allow you to invest in burgeoning equity markets. Given the kind of performance equities have provided in the recent past, considering Ulips as an investment option becomes even more attractive. For instance, equities, as represented by stock market index, Sensex, have provided returns of over 15% year on year in last 15 years. With Ulips you can benefit from the typically high long-term growth by staying invested in them for 10-15 years.

Starting early is ideal, however it can be considered even in the later years of life for specific needs. While it is best to start investing early in any market-linked plans, you can consider investing even after key events in your life. For instance, you could consider investing in Ulips after marriage or birth of first or your second child. Different asset allocation strategies need to be used at different stages. At the accumulation phase, policyholders can opt for a larger proportion of equity funds that can lead to greater wealth creation. They need to move to a more defensive asset allocation, by shifting to debt and cash funds, as one moves into the maturity phase. Today, most Ulip products come with automated asset allocation strategies to provide you with appropriate flexibility.

Disciplined savings is the key to growth. As an old adage goes, ‘it’s not about how much you make; it’s about how you save.’ There’s definitely merit to regular, disciplined financial savings. For those who cannot commit to large premium payments over the quarter or annually can do so with systematic investment plan (SIP) options that some companies offer in Ulips. This allows one to enter equity markets even at a low entry cost. Today, by far Ulips provide a large amount of flexibility to invest in this category.

What adds to the Ulip advantage further, are tax deductions.

You get annual tax deduction of upto Rs 1.5 lakh under Section 80C. The maturity proceeds are also tax free under Section 10(10) D. This effectively makes substantial additions to the amount you finally end up saving after the long Ulip term. Many Ulips also provide loyalty additions, a percentage of your sum assured, premium or fund value, when you stay invested for a certain period of time. This further adds to your final savings amount.

Evidently, Ulip is an investment that can immensely empower an individual since it is so amenable to customisation. This is even as it delivers a combination of growth and financial protection that everyone needs. Probably, it is time the average Indian got to know more about Ulips and be friends with it.

MEANS TO SAVE

• Ulip is an investment empowering an individual since it is so amenable to customisation
   
• Save through SIP which some Ulip companies offer. This allows entry into equity markets at a low cost

The writer is CMO and Head - Strategy & Products at IDBI Federal Life Insurance