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Why Should I Buy Investment Cum Insurance Plans? Research Team | Posted On Monday, March 02,2020, 05:48 PM

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Why Should I Buy Investment Cum Insurance Plans?



An investment cum insurance product can be a one-stop solution if you are in search of a long-term investment product. Through this article let’s analyse how investment cum insurance plans can help you fulfil your financial goals:

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What is Investment Cum Insurance?

Insurance cum investment plans are credible options that involve combining savings plus insurance plan. Such plans are usually known as ULIPs that combine the features of both insurance and investment products. ULIPs or unit-linked plans are focussed on helping investors to save money over their service tenure for a future goal while providing insurance coverage.

These plans come with a lock-in of 5-years thereby enabling financial discipline through regular investments. It is due to these features ULIPs are considered ideal investment products for fulfilling long-term financial goals. The premium paid is channelized towards the insurance premium for maintaining the insurance coverage while the other part is meant for making investments.

See Also: Best Investment Plans for Millennials in 2020

Why Should I Buy Investment Cum Insurance Plans?

If you are in search of ways to invest money and grow it faster than traditional fixed deposits then an investment plus insurance plan is the right option for you. Using this option you can not only save money systematically but can also get reasonable returns along with tax benefits. There is a lot of investment product in the market that offers attractive returns, but ULIPs can help you save while availing life cover to protect your loved ones financially. Here are the types of ULIPS that are available in the market:

Child ULIPs: In this plan, you can invest for a long-term to secure the future of your child and save funds for your child’s education or marriage. In case of demise of the policyholder, the sum assured is paid out to the nominee child in case of the death of the insured parent.

Wealth Creation Plans: Wealth creation plans provide guaranteed returns in the form of sum assured along with accrued bonus. You can use such plans to make a corpus to secure your financial future.

Retirement Planning ULIPs: These are suitable investment cum insurance products for those who want to create a corpus for their retirement during their service tenure.

See Also: Basics of Financial Planning

Tax Benefits of Investment Cum Insurance:

While choosing investment products you must consider the tax implications apart from other factors like the potential risk and returns. These plans are known to offer tax benefits to the investor in the form of tax deduction thus reducing your taxable income thereby reducing your tax outgo.

Here are some of the ways you can avail tax benefits on ULIPS:

Tax Benefit On The Premium Paid:

You can avail tax benefits of up to Rs. 1.5 Lakh per year for certain specific investments under section 80C of ITA. Premiums paid for ULIPs is eligible for deduction of up to Rs. 1.5 Lakh per year. However, to avail the benefit the premium paid should be less than or equal to 20% of the sum assured.

Tax Benefits On The Maturity of The Scheme:

You can avail tax benefits on the maturity of the scheme. As per Section 10(10D) of the Income Tax Act, 1961 the maturity amount plus the bonus is completely free of tax. The death benefit paid use to the demise of the policyholder during the policy tenure is also tax-free.

See Also: Importance of Financial Planning

Tax On Capital Gains:

One of the key benefits of a ULIP plan is that you can invest in equities without attracting LTCG tax.

Advantages of Investment cum Insurance Plans:

  • Helps in Goal-Based Planning: ULIPs are one of the best investment products that help you meet your future financial goals such as child education, creation of wealth or saving a corpus for retirement. You can invest in such products to save money systematically over the years while also securing your life through insurance. You can consider investing in child ULIPS, wealth creation ULIPS, retirement ULIPS which provide more or less the same features and can help accelerate your goal-based planning.
  • Multiple Options for Investment: Unit-linked plans are available under various options and can be customised as per the risk appetite of the investor. These plans offer multiple fund options ranging from debt, balanced funds to equities. You can thus choose to invest in one or more funds depending on your risk appetite, investment horizon and your financial goals.
  • Customizations Available: These policies can be enhanced and customised as per your choice. You can choose riders to increase the scope of your policy.
  • Provides Tax Benefits: The ULIPs come with significant tax benefits that can help you gain attractive returns while minimising your tax outgo in the long-run.

Benefits under the ULIP plans including life cover, option to invest in market-linked products, free fund switches, tax benefits and a lock-in period can help you inculcate savings habits and fulfilling long-term financial goals. This makes ULIPs one of the most preferred options among investors.

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