Is ULIP a Good Investment During COVID-19?

Is ULIP a Good Investment During COVID-19?


The pandemic has made people more aware of the importance of having a robust life insurance cover to secure their families against uncertainties. Also, as the pandemic brought about many financial problems to thousands of families due to loss of jobs, pay cut, etc., people today are keen on saving and investing their money and building a reserve fund for uncertain times in the future. However, where to invest your money? One of the popular investment options you can consider is ULIP or Unit Linked Insurance Plan.

What is ULIP?

ULIP is a unique financial product that helps individuals meet two primarily financial requirements; it offers them life insurance protection and the opportunity to invest and grow their money in the long run. When you pay the premium for ULIP, the insurance companies use a specific portion of the funds to offer life cover and invest the balance amount in different assets to generate returns for you.

Now that you know what ULIP is, let us know if it is a good investment option during the COVID-19 pandemic.

Protects your family’s financial future

ULIP is primarily a life insurance product. If something happens to you during the policy period, the insurance company will pay the death benefit to your family. During uncertain times like the pandemic, the money your family receives can secure their financial future. They can use the amount to meet their everyday needs and maintain their usual lifestyle even in your absence.

Investment opportunity

Another significant benefit of ULIP is that it is one of the best wealth generation instruments. As you may want to focus on savings during the pandemic, you can grow your money by investing in various money market instruments and get inflation-adjusted returns. When you buy ULIP, you can invest in different assets like equity funds, debt funds, government bonds, etc., to suit your risk appetite and financial goals.

You can also switch your funds over time if the funds are underperforming or you want to reallocate your profile to suit your changing goals.

Tax advantages

Tax saving is a critical aspect of financial planning. By investing in ULIP, you can reduce your annual tax liability. The premium you pay for ULIP is eligible for tax deduction up to Rs. 1.5 lakhs in a financial year under Section 80C of the Indian Income Tax Act. Parking your funds in instruments that allow you to save taxes is a smart financial move during the pandemic where every savings matters.

Highly flexible investment option

When you buy ULIP, you get a great deal of flexibility. You can customise your investment and invest in different asset classes, including debt, equity, and hybrid funds of your choice. You can also decide the ratio of investment in each asset class.

If your financial goal or risk-taking capacity changes anytime soon, you can switch your investment from one fund to another accordingly. For example, if you are nearing your retirement, you may want more stability in your portfolio. So, you can switch your investments in equity funds to debt or hybrid funds without incurring any additional charges.

Such flexibility and customisation can help you beat the market volatility and stay on course to accomplishing your financial goals and generate valuable returns in the long run.

Final Word

Thus, with so many benefits, ULIPs are an excellent investment option during and in the aftermath of the COVID-19 pandemic crisis.

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