Being a father of a two year old, Kedar was looking for an insurance plan to safeguard the future of his family. At the same time, he also sought to invest a portion of his income periodically to meet his future financial demands. After being unsure for a while, he finally called up his father-in-law, sound in financial instruments, to seek advice. His father-in-law suggested opting for Unit Linked Insurance Plan (ULIP).

However, one question still bugged him:

Is ULIP Good for the Long Term?

A Unit Linked Insurance Plan (ULIP) is a financial tool holding double benefits of insurance and market linked investments. It becomes promising for individuals who wish to connect their investment with financial security.

A part of the premium you pay is dedicated towards Life Cover and the rest is assigned to a shared pool of money, which invests in debt, equity, or a combination of both. With a minimum lock-in period of 5 years, it acts as a financial tool that helps individuals move towards their financial goals. When compared with other financial instruments, equity-linked options like ULIPs emerge as one of your best bets.

2.90% - 5.50%

Debt

Yes

10 years

7.1%

Debt

Yes

15 years

6.8%

Debt

Yes

5 years

6.7%

Debt

Yes

5 years

7.6%

Debt

Yes

21 years

7.40%

Debt

Yes

5 years

9% - 12% Expected

Equity, Debt

No

Till retirement

10% - 12% Expected

Equity

No

3 years

Benefits of ULIPs

The various benefits that decisively answer the question of whether ULIPs are good for the long term are:

A common nickname for compounding is "the eighth wonder." Any investment is worth the wait because of its unseen power. Compounding is the ability of an asset to provide income that is then reinvested by the fund to produce its own income. By doing this, your investment money stays exactly where it is while your earnings from interest and other sources continue to grow. If everything is done correctly, your fund should be able to produce large gains over a number of years.

Unit-linked insurance plans (ULIPs), take advantage of compounding while requiring you to commit to making regular payments and allocating your money toward specific objectives. In addition, it protects your loved ones financially in the event of your untimely death through the Sum Assured .

So, in essence, investing consistently over a long period of time is the key to utilising compounding.

India has been ranked as the nation with the worst retirement conditions. With lack of care and minimal savings, elders lead a fragile life after retirement.

Individuals are given the option of switching funds with ULIPs.

One prime reason you should place your savings into a ULIP is that ULIPs primarily focus on long term wealth creation, and help you achieve the same. How?

Tax exemption is one of the biggest reasons why one should invest in ULIPs.

The above mentioned diverse benefits make ULIPs an ideal investment tool for your long-term financial goals. If, like Kedar, you are seeking a cover for your family and at the same time looking for a suitable financial instrument for market-linked growth, ULIP becomes a reasonable choice with such benefits. To know more about ULIPs, feel free to connect with our trusted financial advisors today!