Wednesday, December 8, 2021

Additional Premiums on ULIPs Explained

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When it comes to spending money, everyone wants to spend as little as possible for the best things.  Having valuable things is often a matter of pride. Now, if you add a cost-saving aspect to the equation, this pride gets even higher. The same can be applied to ULIP plans. ULIPs are often sought out by policy buyers for their wide range of benefits. However, there is also the matter of having more for less in exchange. For this reason, there is a provision in ULIPs known as top-ups.

With ULIP plans, the more you invest today, the closer you get to creating a big amount of money for your future. A top-up helps you in achieving just that. It makes sure that if a particular ULIP fund is performing well, you can get a higher level of benefit from it. But a top-up also requires more premium to be paid. Hence, there is careful consideration to be done. Before youthink about top-ups,learn about ULIPS:

Understanding ULIPs

If you want financial security and investing at once, ULIPs are the best options for you. What is ULIP? It is a life insurance plan that is linked with the market. Once you pay the money as a premium, it puts that into proper investment opportunities. The plan works using units. These units are financial commodities that are used for investment and insurance transactions. For a given amount, you can buy a certain number of units; if you divide these units across the money you paid, you will have the monetary value of each unit. By investing these units into market linked-funds, you allow them to grow and become more valuable.

ULIPs offer you flexible opportunities to divide your money between two different ways when it comes to finding different investment options. One is equity, and another one is debt asset classes. In addition, like many other insurance policies, ULIPs provide a lucrative benefit of tax deduction according to Section 80C of the Income Tax Act. If you want to generate wealth along with your regular income, ULIP taxbenefits will help you achieve your life goals. A top-up simply allows you to put more money. This way, your returns get higher simply because your investment was high as well.

Understanding top-ups

Top-ups on ULIPs have many benefits. Here is a look into what top-ups can mean for your ULIP:

Increased sum assured

The sum assured is the main insurance benefit given to you in the ULIP policy. It is essentially the feature that allows you to invest money with a decent amount of freedom. Since your insurance coverage is intact, all that is left to worry about is the investment. Top-ups help you in making the most out of your fund’s performance. However, they also allow you to increase your sum assured. With a top-up, you buy more units. You can divert these units towards insurance coverage and have a higher sum assured.

Lock-in period

A lock-in period can be best described as the minimum amount of time that you would have to hold an investment. This means that you cannot withdraw your investment until the agreed-upon lock-in period has finished. Most insurance providers go for a lock-in period of upto 5 years, even on the top-up premium that you invest into the ULIP plan.Being a long-term product, a ULIP plan is something you should stay invested in for a long time. Moreover, if you see good performance from your funds, you should put more money into them. But there is also the questionof managing money as a whole. It would not be smart to invest all your money into a ULIP plan at once without any results. This is where ULIPs offer you an advantage. You can make an initial investment and then invest more if need be through top-ups.

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