ULIPs: Benefits of Investing for a 20-Year Horizon


Investing in ULIPs can be rewarding if you have a long-term investment outlook. Continue to read to know why you should consider investing in ULIPs for 20 years or more.

Unit-Linked Insurance Plans, or ULIPs, are one of the most popular investment options in India. A ULIP investment can be a good long-term investment option for those who are willing to take some risk in pursuit of higher returns, while also enjoying the benefits of insurance coverage.

Following are some good reasons to invest in ULIP with a 20-year investment horizon.

1.   Long Time to Grow

The compounding effect can work best when you give enough time to your investments to grow. Also, you can have a natural advantage with age on your side. So, there is a good probability of accumulating significant wealth in the long term, even by investing small amounts over a long period.

You can use the online ULIP investment calculator to estimate how much you can expect your investments to grow over time.

  • Go to the online ULIP investment calculator
  • Select the monthly investment amount
  • Set the investment tenure to 20 years
  • Click the “calculate” tab to know the expected return after 20 years

2.   Financial Discipline

A ULIP investment can help you develop financial discipline early in life. You learn to make provisions for your ULIP premiums before proceeding with your other expenses.

3.   Income Tax Benefits

ULIPs can offer various types of tax benefits. First, a ULIP investment is eligible for tax deductions up to Rs 1.5 lakhs per year against the premium paid under Section 80C. You can claim this tax deduction on your annual ULIP premium every year for the entire policy term.

Additionally, you can claim tax exemption under Section 10(10D) on the amount you receive upon maturity of your ULIP. However, income from ULIP is taxable if the annual ULIP premium exceeds ₹2.5 lakhs during the policy term.

4.   Life Insurance Cover

You can’t rule out any future possibilities when looking for a 20-year period which is a long time. Life can throw unpleasant surprises during this period. Thankfully, a ULIP offers both investment and life insurance benefits. Therefore, a ULIP investment can ensure your family stays financially protected even if you’re no longer around.

5.   Investment Flexibility

Unlike traditional insurance policies, ULIPs offer this unique flexibility to choose an investment strategy that best suits your risk profile and financial goals. You can choose from various funds with different allocation percentages towards various asset classes.

For instance, if you don’t mind market volatility, you can choose funds that predominantly invest in equities to increase your chances of getting high returns. Similarly, you can choose to play safe by selecting debt-oriented funds. You can go with balanced funds that provide proportionate exposure to both equities and debts.

Additionally, you can also switch between funds or alter the asset allocation of your investments over time. So, you can adjust your portfolio as you grow old and your risk appetite changes. For example, you may select an equity-oriented fund for your ULIP at the age of 30. However, you may like to reduce the equity exposure after some time as you approach the age of 40.

You’re already on the right path by considering a 20-year investment horizon. Now, select the right investment amount and add a ULIP to your investment portfolio. Twenty years from now, it may prove to be an excellent decision on your part.

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