Insurance is a way of mitigating risks. While the value of life can never be measured in monetary terms, getting life insurance offers financial stability in times of uncertainties as well as wealth creation towards your dreams. With so many insurance companies offering different types of products, it is necessary to understand which plan you need to buy. Two of those product options are Unit Linked Insurance Plans and Term Insurance.
In simple terms, a term life insurance policy is a plan that covers your family’s financial security in your absence. Unit linked insurance plans also safeguard your family, while helping grow your money by investing in equity or debt MARKETS. ULIPs fulfil the need of investors looking to gain extra returns for their life goals such as retirement and other personal financial goals.
Who should buy a term insurance plan?
If you are looking to secure the future of your loved ones at a lower cost, then a term insurance plan is best suited for you. It also gives you the added benefit of claiming tax deductions under Section 80C of the Income Tax Act, 1961.
Who should buy ULIPs?
ULIPs are beneficial if you are looking for additional long-term gains from life insurance. They provide a much-needed portfolio diversification with just one investment. Like term insurance, with Unit linked insurance plans too, you can get a tax deduction up to Rs. 1.5 Lakh under Section 80C and tax exemption on ULIP returns under Section 10(10D) of the Income Tax Act.
Additionally, through unit linked insurance plans, you can reap the benefits of the long term gains in equities without having to pay any capital gain tax.
Why term insurance?
Term life insurance provides your family with the assurance of a high coverage against the biggest possible risk, i.e. death. It is also considered to be the cheapest form of life insurance with no frills attached. Once you buy a term insurance plan, you freeze the premium for the rest of the policy tenure.
So, the earlier you buy a term plan, the more profitable it proves to be in the long run.
ULIPs give you the flexibility to invest your money as per your risk profile, convenience and financial commitments. You get the option of selecting from some the top-rated funds in the market, at Finserv MARKETS. You can transfer or switch the accumulated amount among any of the 6 to 8 funds available, with no tax implications.
Along with long term benefits, ULIP plans also provide the flexibility of tenure, despite a five-year lock-in period, as you can cash in on the investment any time after five years without any cost.
Both, term life insurance and unit linked insurance plans are meant to serve two different purposes, with the former being an investment-cum-insurance plan, while the latter a pure protection plan.
Normally, you should go for investment plans that build a corpus for your future requirement and ULIPs at Finserv MARKETS are one such product. However, the financial stability of your family remains paramount, which can be achieved with a prudent mix of term and unit-linked insurance plans.
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