Can ULIP be a fruitful Investment in the Long run?
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Can ULIP be a fruitful Investment in the Long run?

February 5, 2019

Unit-linked Insurance Plan, i.e. ULIP is a pioneering, hybrid investment-insurance product, which offers triple benefits of alluring investment opportunity, life insurance cover, and tax saving benefits to the investor.

As per a report by the International Monetary Fund (IMF) of India, the country probably grows at 7.8 per cent of the GDP in the year 2019. However, the projected growth of China was 6.4 per cent of the GDP.

Given this fact, it is better to understand that this is the best time of invest in various avenues with a motive to grow your hard-earned money.

But wait!

What’s the deal here?

Well, on October 3 and 4, the Indian stock market crashed with a registered loss of Rs. 5 Lakh Crore. The MF invsetors who invested in mid-cap and small-cap stocks were at a huge loss because of this crash of the stock market.

ULIP Investment

Taking everything into account, the stock market crash turned out to be a huge blow for the investors who made investment in equity mutual funds, even though 10 per cent Long-term capital gains (LTCG) tax was introduced.

But the big question remains the same and that is:

“What should you do in order to invest in equity of your choice without worrying about the market volatility?”

Well, investment whizzes recommend you to choose Unit-linked Insurance Plan (ULIP full form in Insurance) to reap fruitful returns in the long-run. Even though you’re looking for a short-term plan, a ULIP scheme can be a wise investment.

Wondering why?

Here’s why:

ULIP schemes for Higher Returns:

While investing in ULIPs, your hard-earned money grows over a period of time. And, in case of your demise during the course of your investment, your nominated beneficiary or dependents get the sum assured or fund value, whichever is higher, in the form of death benefit. If you plan to make investment for a high return, you must invest in the equity-linked funds. In these funds, you can expect returns ranging from 12 per cent to 15 per cent over a period of 10 years to 15 years. The investors who want to stay away from the market-risks can choose debt ULIPs, which offer a return ranging from 8 per cent to 9 per cent. The entire financial corpus that you receive is tax-free.

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ULIPs for different stages of Life:

If you plan for marriage or are married already and have kids, then it is better that you look for plans, which fulfil your financial objectives in the future. You must begin with your investment at an early stage so that in the next 20 years you can build a decent financial corpus for your loved ones.

Let’s take an example here:

If you begin with investment of INR 10,000 on a monthly basis from today for the next 20 years, you will receive approximately INR 40 Lakh after the maturity. This was calculated at a rate of around 8 per cent per annum; however, the actual returns could be a little higher ranging from 12 per cent to 15 per cent and might grow up to INR 75 Lakh. You can use this money for your kids’ marriage or education.

And in case of an untimely demise of the parent, there are various child plans that come with s smart benefit option such as yearly income for the survival of your child and all the future premiums are paid by your insurance provider on your behalf. However, with some other child insurance plans, the insurance provider will pay only the premium on your behalf until the maturity of the policy and the nominated beneficiary gets the corpus sum.

ULIPs Plans for Retirement:

You always plan to have a relaxed and tension-free retirement. But, that’s not possible without a proper planning and a well-planned financial corpus. What should you do to make your retirement days tension-free?

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Well, you must invest in those ULIP plans which not only look out for you during inflation but also give you a decent amount of return on your investment.

How can you do that?

A better option to invest in a retirement plan is to take your current monthly salary as a benchmark that you’d like to have after your retirement as well.

Let us explain this with an example:

If your current monthly income is INR 30,000 and you want to retire at an age of 60 years, you will need INR 97,000 every month after a period of 30 years in order to maintain the same lifestyle. This evaluation has taken an average inflation rate of 4 per cent per year into consideration. To get a yearly pension of INR 97,000 you will need a financial corpus of a minimum of INR 1 Crore. In order to get this financial corpus, you will have to make an investment of INR 9,000 every month (approximately evaluated at a rate of 8 per cent per annum).

In order to grow your financial corpus, make investment in equity funds of ULIP and get a 12-15 per cent return in the long run. As you grow old, you can make transfer of your money to a debt ULIP in order to protect the maturity financial corpus from any ups and down of the market.

Summing it up!

Now that you know that you can combine investment with insurance, find the best and suitable ULIP plan. Invest in ULIP and avail triple benefits to create protection net for you and your family’s future. All the aforementioned reasons are enough to support the notion that ULIP plans can be a fruitful investment in the long-run!

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