The most often discussed investment options are Unit Linked Insurance Plans and Mutual funds. There is a longstanding debate between investor and advisors about which is the most worthy option out of these two. They are very similar in their structure and functioning yet distinctly different. Both the options offer investors an exposure to a market-linked portfolio and provide a chance to get positive returns. So, let’s have a quick look at some aspects of investing and understand these two popular investment products.
ULIP as a life coverage product offers insurance benefit to the policyholder and also asset choices to invest in numerous qualified investments like mutual funds, stocks or bonds. It is attractive mostly as it offers an investment option along with an insurance cover. When a premium is paid for a ULIP plan, a specific part goes for life cover and the remaining as investment. Nevertheless, investment in a Unit liked insurance plan yields good results only if invested for a long term.
It is an option with a collective investment scheme, where the money of investors is pooled and put in different asset classes or shares, and so on. As a many investors invest in the fund to form a pool, this is a productive form of investment. Thus, an investor can purchase bonds and stocks at a comparatively lower trading cost. In addition to this, in most cases of MFs, money is available to investor anytime he/she wants it. From time to time, the dividend is distributed to the mutual fund investors.
Mutual Funds are pure investment product whereas Unit-linked Insurance Plans cover the benefits of both insurance cover and investment option.
When it comes to investing your money, naturally you will look for maximum returns. Unit Linked Insurance Policy proves to be a better option in case of the long-term investment plan.
Other benefits of ULIPs over an MF are:
- As compared to other investment options in investment segment, ULIPs provide transparency and flexibility as compared to other investment options in insurance segment
- ULIPs offer triple tax benefit –
- ULIPs offer initial tax saving under section 80C.
- The final sum at plan completion is tax free under section 10(10D).
- The entire investment amount doesn’t call for any tax except mortality cost.
- It also allows an investor to switch between debt funds and equity funds or vice versa with no entry or exit charges like in case of MFs.
No matter what your financial goal is like for child education, retirement etc., a Unit Linked Insurance Policy upto maturity will work as a benefit. It will give you a chance to enjoy the double benefit of protection and savings, in one scheme.
Start investing in ULIPs to get the best returns now!