Term insurance plan, mutual fund, ULIP: what is the best investment option?

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Term insurance plans

Insurance is a vehicle of protection that helps protect you or your family against any financial loss that may result from uncertain and unexpected events. If you have dependents or are a single income member, pure term insurance plans are appropriate life insurance for you. Taking out adequate coverage can help your family deal with the financial shock caused by your unfortunate death.

Term plans offer more coverage at lower rates, allowing you to get a multi-million dollar life insurance policy for a small cost. In addition, additional benefits such as income in the event of disability, critical illness and waiver of premiums protect you from dangers such as loss of income, among others. Your protection needs should be met by a protection vehicle such as term life insurance. Under Section 80C of the Indian Income Tax Act 1961, term insurance schemes are eligible for a deduction of Rs 1.5 in a financial year.

Mutual fund

Mutual fund

Mutual funds are a pure investment vehicle that invests your funds with an investment objective in mind. Mutual funds offer you different categories and investment styles, and returns vary from category to category. Mutual funds are known for their flexibility. You can stop or pause, increase or decrease your SIPs at any time without charge and withdraw your funds as and when you want.

ELSS (Equity-Linked Saving Schemes) is a class of mutual funds with a 3-year lock-up period, which offers excellent returns and tax benefits. Speaking of tax advantages, ELSS Mutual Funds offer tax advantages under Section 80C up to 1.5 lakh in a fiscal year, the fund comes with a lock-up period of 3 year.

ULIP (unit-linked investment plan)

ULIP (unit-linked investment plan)

Unlike mutual funds, ULIPs are both an insurance and an investment product rolled into one. While ULIPs have a lock-up period of 5 years, and failure to pay premiums can result in lapse of the policy. As a result, your insurance coverage will cease. ULIPs are generally suitable for the most risk-averse investors and their capacity for return is lower than that of mutual funds. ULIP investing also offers tax advantages. ULIP investors can benefit from tax under Section 80C of the Indian Income Tax Act 1961, with a maximum of 10% of the sum assured, and the policy is locked in for 5 years.

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