Who hasn’t been a part of a myths or fake news? We all have! One such case of rumours is with Unit Linked Insurance Plan, i.e., ULIP plan. There are various rumours when we talk about the ULIP plan. People who planned in investing in a ULIP plan must have come across at least one rumour.

Let us first understand what Unit Linked Insurance Plan, i.e., the ULIP plan is.

What is Unit Linked Insurance Plan?

A ULIP is an investment plan wherein a certain part of the premium paid by the investor is kept for insurance. The other part of the premium is used as an investment and is put in the market towards of shares, equity, bonds etc., for the purpose of growth of money. Hence, the ULIP offers dual benefits of both investments as well as insurance.

Similar to other insurance plans, another advantage of investing in a ULIP is that the premiums paid by the investor are eligible for tax benefits under section 80C of the Income Tax Act, 1961. However, these tax laws are subject to change from time to time.

Let us demystify a few of the myths that revolve around the ULIPs.

Debunking 5 Myths around Unit Linked Insurance Plans

  1. Unit linked Insurance Plan is Costly

It is believed that the ULIP plans are costly and cannot be afforded by everyone. However, compared to some of the other insurance plans, it is one of the most cost-effective and value for money investment plans that anyone can invest in. There are various ULIP plans available in the market that you can choose according to your convenience and budget.

  1. ULIP plans Involve High Risk

Rash driving is risky but investing in ULIP plans is not. Unlike the myth that the ULIP plan involves high risk in all cases, ULIP plans offer various risk options such as Debt Funds for low risk, Equity Fund for high-risk, etc. Therefore, it is easier for people to get better clarity if they want to go for high-risk investments or low-risk investments.

  1. ULIP plans Offer insufficient Life Cover

On the contrary of the rumour that ULIP plan offer insufficient life cover, ULIP plans do provide sufficient life coverage. One can easily go for a ULIP plan, who wants sufficient life coverage along with an investment plan.

Low Returns with ULIP plan

Many people believe this myth of low returns with the ULIP plan. On the contrary, the ULIP plan provides adequate returns. The performance of the returns on the ULIP plan majorly depends upon the performance of the fund in the market. When it comes to stable returns, debt funds can be an ideal choice for investors. Similarly, when it comes to high-risk funds, equity and balanced funds are some of the better choices.

  1. ULIP Plan is Not an Ideal Investment Plan for Financial Security

It is a rumour that ULIP plan is not an ideal investment plan for financial security.  However, the reality is that ULIP plan offers to save a part of your premium for insurance, but it also uses the other amount of your premium for investment purposes. As a result, ULIP plans not only provides insurance but also helps in getting returns for financial requirements in future. Thus ULIP plan comes with dual benefits of both investment as well as insurance

Conclusion

Various myths are associated with ULIPs. Even though there are various myths attached to the ULIP plan, it is one of the ideal investment plans for future financial security. Whenever one chooses to invest in a ULIP plan, he should prefer an insurance providing company that is trustworthy top-rated and has a good claim settlement ratio.

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