Finance

The rising popularity of Unit-Linked Insurance Plan (ULIP) is a result of its dual advantages, which include a life insurance policy cover and investment options. Read on to know the ULIP meaning and more details about the policy.

What is ULIP?

A ULIP is a life insurance policy, but it has the added benefit of wealth build-up. You have to pay a premium regularly to keep the policy active. Your insurance provider levies a very small percentage of the money as various charges. They invest the remaining capital in different funds, such as equity and debt. You can also choose to diversify your money by investing in a way that combines both equity and debt-based instruments. ULIPs accumulate into a substantial fortune over an extended period.

Now that you understand the ULIP meaning, let us look into some of its plus points that make the policy a preferred choice among Indian investors.

1. Builds good investment habits

ULIPs have a five-year lock-in period, ensuring that you stay invested in the policy for at least this duration. You need to pay your premium on time to maintain the policy during this tenure without the option to withdraw money. This ULIP feature helps you develop a disciplined investment habit and patience. These skills can make you a wise investor. Once you have good investment habits, you can earn high returns in the long run.

2. Tax benefits

One of the ULIP benefits that make it a profitable investment option is its tax exemptions. ULIPs offer multiple deductions, such as:

• Your premium is tax-deductible up to INR 1.5 lakh per year according to Section 80C of the Income Tax Act, 1961
• You get a tax-free maturity payout if you bought the policy before February 1, 2021, as per Section 10 (10D) of the Income Tax Act, 1961
• Your maturity benefit remains tax-free if you pay an annual premium lower than INR 2.5 lakh; however you have to pay a 10% Long Term Capital Gains (LTCG) tax on the maturity proceeds if your yearly premium exceeds this amount; this applies to policies bought after or on February 1, 2021
• Your family members will receive a tax-free death benefit, irrespective of when you purchase the policy

3. Flexible investment options

ULIPs let you decide whether to invest your money in equity, debt, or a combination of funds. This versatility permits you to choose an investment avenue depending on your financial goals and risk tenacity. Equity funds are risky but have the potential to provide higher profits. Debt funds attract lesser risk and offer moderate returns.

4. Fund-switching

One of the unique ULIP benefits is the fund-switching facility, giving you more control over your investments. With the switching alternative, you can reallocate your money among equity and debt funds at any time during the policy tenure. However, your insurer may allow only a few free switches per year and charge for additional switching.

Types of ULIPs

The forms of ULIPs depend on their premium payment and fund options. This list will give you a better idea:

• Regular premium

Here, you need to pay multiple premiums during the policy tenure. Insurers let you choose between yearly, half-yearly, and monthly premium payment choices.

• Single-premium

While purchasing a ULIP with the single-premium option, you have to pay the entire amount as a lump sum at the time of policy initiation. Once you pay it, the policy will remain active for its entire tenure.

• Equity and debt fund-based funds

The type of ULIP you have depends on your investment choices. If you put your entire capital in risky but high-returning avenues, such as shares, it will be an equity-based ULIP. In the case of a debt-based ULIP, the insurer will invest your money in less risky fixed interest instruments, government securities, and similar products.

Now that you know its advantages, it is easy to understand why you should invest in ULIP now.

The ideal situation would be to enjoy a fun and fulfilling retirement, though the road to success is paved with potential roadblocks. In the year 2021, the ongoing pandemic is the biggest issue, as it has driven many businesses to the brink and forced an introverted lifestyle on most homeowners. That said, even with all of the potential problems, the opportunity to successfully save depends on your willingness to stay disciplined.

It can be challenging to get started on the road to a full wallet and a happy retirement without the proper mindset. Fortunately, even a simple understanding of how best to move forward can help those struggling to save find their rhythm. Here are just a few ways to help develop a solid saving plan for retirement.

Setting the groundwork with a proper retirement strategy

The first thing to consider would be your current age, and when you intend to retire. While it is true that most young workers would not want to consider planning for retirement right away, keep in mind that saving for retirement can simply mean saving in general.

In a lot of ways, setting the groundwork with a proper retirement strategy is about committing to a savings plan. No matter how young or how old, there is always the potential to start saving for a rainy day — the younger the better. While it might not necessarily be about retirement, the idea of financial freedom is a fantastic enough goal to start saving as early as possible.

The power of thinking small

You have likely already heard of the term, “life is all about the little things.” When it comes to saving up for retirement, the saying rings truer than most. The idea of compounding funds over time can seem like a big challenge, but it can yield incredible results, especially for those looking to save up for retirement. If it is possible to save as little as ten per cent of earnings a month, it is possible to save up for retirement. For those considering money audits, saving even a little amount over a twenty-year period with an eight per cent return rate can yield great results.

The potential of retirement funds for ex-pats

One of the most common scenarios involves an individual travelling to another country for the sake of their work. Over time, they develop a positive relationship with the country and eventually might want to retire. That said, it can be a little tricky to figure out how best to build a pension in a foreign country. For the ex-pat looking for solutions, www.pensionsforexpats.co.uk offers plenty of potential solutions. It is still entirely possible for an ex-pat to benefit from pension options.

While it might be somewhat intimidating to consider a retirement plan for young workers, it is not necessarily just for retirement. Saving money, in general, is a great idea. Learning all about how to let your money grow provides opportunities not just for you, but for your family.

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Substantial sums of cash are required for large purchases and projects. While some people may save the funds they need, most people need to secure financing to afford significant expenses.

 

Once you understand how to secure financing, you must determine the best way to use the funds. Continue reading to learn about financing options and your options for how to use your money.

Lenders

 

The four primary sources borrowers in the U.S. and abroad can apply to for financing are banks, credit unions, hard money lenders, and private money lenders. Banks and credit unions are traditional creditors. They review your income, income to debt ratio, and credit score to determine if they should approve a loan. Other factors, such as whether you’re a homeowner with collateral to secure the loan, may also be considered.

 

Borrowers can also capitalize on the advantages of securing a private money loan. Private money loans from sources such as Pacific Private Money connect investors and borrowers. The funding for private money loans comes from companies or individuals who want to generate revenue through financial investments. Private money loans may have a specific focus. For example, Pacific Private Money lends money to people purchasing real estate in California.

Real Estate

 

Whether you’re planning to put down roots in Northern Virginia or San Francisco, California, investing in real estate can be one of the smartest ways to use financing. You can eliminate rent payments and use your funds to build equity in your property.

 

Homeowners may also borrow money to perform crucial repairs or home improvement projects. While it may not be financially sound to invest in cosmetic changes, a roof or skylight that leaks can cause significant problems for homeowners. When precipitation gets inside your home, it can damage floors, ceilings, and support beams. If you’re moving to Northern Virginia, fo example, Google “Northern Virginia roofing contractors” to locate experienced contractors in your area who can perform crucial roof repairs, such as replacing missing shingles. You should also ensure your gutters are cleaned regularly to prevent water from building up on your roof. If you’re unable to do this yourself, hire contractors to clear your gutters for you.

 

Other critical home improvement projects include updating the plumbing, electrical, and heating, ventilation, and air conditioning (HVAC) systems. Outdated pipes can crumble, and build-up can cause blockages that cause sewage to back up in your home. Damaged or outdated electrical systems can cause house fires. Old HVAC systems will use more energy and inflate your energy bills. They’re also more likely to distribute toxins throughout your home.

Business Investments

 

Securing financing can enable you to start or expand a business. For example, if you have employees who travel between buildings on a large property, you may consider investing in autonomous vehicles to transport employees. Eliminating the need for human drivers can free up time employees can spend completing paperwork, filing reports, and performing other tasks. It’s a good idea to discuss this option with your insurance company, research National Highway Traffic Safety Administration (NHTSA) information about driverless cars, and review driverless car accident statistics before investing in autonomous cars.

 

Other business investment options include securing start-up equipment and materials, covering marketing costs, and hiring developers to create a business website.

Debt Management

 

If you’ve made some questionable financial decisions, you’re not alone. Many people incur credit card debt and struggle to pay off their bills. It’s also possible you have a car loan and student loans to pay off.

 

Debt consolidation is a common reason to borrow funds. Interest rates for credit card debt average 14.65 percent in the United States, while interest rates for automobile and real estate purchases are substantially lower. You may be able to secure financing at a lower interest rate, pay off your existing debts, and have a single low-interest loan to repay. Debt consolidation can increase your disposable income and improve your credit score.

 

Financing can be an effective way to afford crucial home repair projects, cover business expenses, and consolidate debt. Review options from multiple creditors to ensure you find the best financing option for your needs.

The financial responsibilities of a person can change from time to time. For instance, goals like children’s education, their wedding, and buying a bigger house can vary according to the different stages of life.

In many cases, you may even have to take a loan to fulfill your monetary aspirations. However, have you imagined what happens if an unfortunate incident leads to your untimely absence? How will your family meet all the expenses? How will they repay the loans? Therefore, safeguarding your family’s economic future should be your top priority. So, investing in a life insurance plan should be the first thing in your financial portfolio.

It is advisable to invest in term insurance plans in India, as they offer high sum assured at an affordable premium. If you are planning to buy a term plan while dealing with financial liabilities, then here are a few things to consider.

• Ascertain your needs

Determine your requirements before buying a term insurance plan. For example, if you are dealing with outstanding debts and suffering from any medical condition, it is essential to buy a term plan with a critical illness rider. The rider can prove valuable in the time of need. As no one knows what the future holds for you and when will a financial emergency strike, such money can help you reduce the financial burden. While investing in a term plan, ensure that you align the policy’s tenure as per the duration of your financial obligations, such as loans.

• Get a high life cover

The sum assured plays a pivotal role in determining your family’s financial stability when you are no longer around. It should act as an income replacement tool and must be sufficient to help your family to meet the day-to-day costs and medical expenses as well as achieve their short-term and long-term objectives. However, what should be an ideal sum assured? Ideally, it should be at least 20-30 times your annual income. Before ascertaining the sum assured for your term policy, it becomes vital to ascertain your financial position. For instance, if you have liabilities like a house loan, personal loan, and car loan, and the sum assured is lesser than the total value of your debts, then your family will have to bear the strain of repaying your loans. In such circumstances, they will be left with no money to lead a financially independent life.

• Reduce your tax liabilities

One of the best term insurance benefits is that you can avail of tax deductions under various sections of the Income Tax Act, 1961. As per Section 80C, you can seek a maximum deduction of INR 1.5 lakh per annum for the premium that you pay towards your policy. Additionally, the sum assured received by your nominees is tax-free as per Section 10 (10D) of the Act. So, with a term policy, you can end up saving a significant sum in the long run.

The monetary security of your family members is completely dependent on the sum assured that you select. You cannot go wrong here, as it can make it difficult for your loved ones to make ends meet, especially if you are the sole breadwinner of the family.

Understandably, you may have taken loans to fulfill your family’s wishes, like buying a house or car or taking them out for an international holiday. However, as a responsible individual, make sure that your dependents need not take the stress of paying the monthly installments and end up facing a financial crunch. So, without any delay, buy suitable term insurance plans in India and provide the much-needed financial protection to your dear ones.