What makes New Age ULIPs a smart investment option in the current volatile market?

Unit-linked insurance plan or ULIPs are being recognized as one of the best investment options in the recent times. From being exempted from Long Time Capital Gains Tax (LTCG Tax) to acting as a prudent entrance to the world of equity, ULIPs have a unique product stand that has been gaining popularity. The recent volatilities in the market and the consistent long-term performance of ULIPs have all made them a favorite amongst investors.

ULIPs have been offering a perfect combination of debt and equity investment and life insurance at reasonable rates, making them a trusted aide to investors. There are various other features that give ULIPs the upper hand in the world of investment products. Whether, their tax saving feature or the option of choosing from different funds, the benefits to ULIPs are numerous.

1. Return on Mortality Charge


ULIPs are products that offer both life insurance cover as well as investment options under a single plan and as a result, have a premium. This premium includes a mortality charge on the ULIP which covers the life insurance. However, this is changing with plans like Bajaj Allianz Life Goal Assure offering a return on mortality charge on the maturity. The investors will get the mortality charge back once the plan matures, simply offering a free life insurance cover.

2. Freedom of Choice

ULIPs offer a choice to switch between funds to get the maximum returns based on their requirements. ULIPs typically offer pure debt, pure equity and balanced funds to invest in. These products offer the investor to switch between the funds, helping them to move out of loss-making funds. ULIPS have a range of 4 to 8 funds to choose from, based on the investor's risk-taking abilities.

3. Tax Saving Ability

One of the most important benefits of ULIPs has to be their tax benefits. The tax benefits for ULIPs are available both at the time of investment as well as maturity. The investments made in ULIPs are deductible from the taxable income under section 80 C (up to Rs 1.5 lakhs). The money earned from ULIP investments are also exempted from tax as per section 10(10D).

4. Returns Enhancer

In addition to the returns being exempted from tax, ULIPs like the Bajaj Allianz Life Goal Assure come with additional benefits like the return enhancer given the investor opt to take maturity proceeds in instalments. The Returns Enhancer, which is an addition of 0.5% of each due installment, allows investors to receive the maturity benefit in instalments over a period of five years while continuing to be invested in funds.

5. Higher Returns

ULIPs and mutual funds were known to have a war of higher returns over the past decade. MorningStar, an independent expert investment rating body, rates funds accounting for minimum downward variation, has assigned 5-star ratings to several ULIP funds indicating their stable performance. High returns have been observed for longer investment tenure. ULIP Funds like Bajaj Allianz Life Pure Stock show a CAGR growth rate as high as 20%* on a five year horizon, where as various mutual funds offer around 15% to 18%* returns.

These are some of the points that make ULIPs the best investment option in the current market condition. With their low risk and high return giving characteristics and easy switch options, ULIPs are the solution to every investor's worry about the volatility of the market. They offer mental comfort for the investors who are looking to enter the world of equity to meet their long term investment objectives, without the stress that comes with the rapid changes in the market.