For establishing a financial balance, you need to have life insurance along with investments in place. With several types of life insurance and a variety of investment options available, it can be confusing to decide which financial instruments to put your money in. Having life insurance is vital, as it takes care of the financial needs of your family in your absence. It ensures that in your absence, your loved ones have a backup to fulfil their needs. Also, your family is not burdened by any of your outstanding liabilities. If you are a mother, especially a single mother, it becomes even more essential to have life insurance. In case something unfortunate were to happen and you suddenly lose your life, your children would need a financial backup that they can access.
There are several life insurances plans available in the market. Most mothers consider the ones that also have an investment or saving component to their policy. This ensures that when your life insurance matures, you have some funds to access. One such policy that has gained popularity in recent years is the ULIP (Unit Linked Insurance Plan). ULIP is a life insurance policy that has an investment quotient to it. When you buy a ULIP, you pay premiums like any other life insurance. However, here the money you pay is partially used for providing you with a life cover and partially invested in the funds of your choice. Because of the dual services that it offers, several advantages are offered by ULIPs. Here is what makes ULIP a perfect investment for women and single mothers:
- Dual needs in a single plan
Being a single mother, having life insurance ensures that your children have a financial backup to rely on. In case of your unfortunate demise, there are funds available for fulfilling your child’s needs. Along with having a life cover, it is vital that you save for yourself and your child’s future. This is where having a ULIP benefits you. Since, along with a life cover, you also get an investment opportunity. Half of the premium that you pay is allotted to the funds of your choice. You can use a ULIP return calculator and access the fund performance of the plan that you are planning to buy.
- Tax benefits
When you buy a financial product, one of the key things to consider is its tax implications. The premiums that you pay for your ULIP are exempt from taxes under Section 80C of the Income Tax Act. In case of your demise during the policy duration, the sum assured that your nominee receives is also exempt from taxes under Section 10 (10D) of the Income Tax Act. The maturity amount that you receive when your ULIP matures is also subjected to tax exemptions provided certain conditions are met. The tax advantages offered by ULIPs are one of the key reasons individuals buy a ULIP.
- Several choices
For the investment aspect of your ULIP, you can choose from several funds based on your risk appetite. If you are looking for investments that offer high returns, there are equity funds. They do come with a high risk for the returns that they offer. If you are looking for safe investments, there are debt funds. They usually offer lower returns than equity funds. There are also balanced funds for individuals who want to invest in equity but do not want to take a complete risk. They offer a combination of equity and debt funds, providing moderate returns for the moderate risk involved.
- Shifting fund allocation
Being a mother, your risk appetite and your financial goals may evolve over the years. ULIPs allow you to switch your fund allocation from equity to debt or vice versa anytime you want. If you are unhappy with your investment, you can switch it to a different fund type. With a ULIP return calculator, you get an estimate of the returns you can get from particular funds.
Along with the above benefits, having a child may require you to withdraw funds suddenly. ULIPs allow free partial withdrawals after the lock-in period anytime you want. This ensures that you can use the funds whenever you need them.
