ULIPs and their Role in Funding Medical Emergencies

What are ULIPs and What Makes them an Ideal Tool for Funding Medical Emergencies?

A ULIP Investment is on trend, due to its ability to provide both insurance coverage and investment benefits.  One of the primary benefits of ULIPs is their capacity to assist investors in building an emergency fund to handle unexpected medical bills. 

In this article, we will go through ULIPs in detail and examine how they might be used to fund medical crises.

ULIPs are investment solutions that combine the advantages of insurance and investing. They let policyholders invest in a variety of funds, including equity, debt, and balanced funds. Furthermore, ULIPs provide life insurance, guaranteeing that the policyholder's family is financially secure in the event of an unexpected incident.

A Comprehensive Overview of the Benefits of ULIPs

Here are some of the to-be-noted benefits of ULIP:

• ULIPs offer both investing and insurance benefits, making them a comprehensive financial solution that may help you build wealth while also protecting your family's financial future.
• Based on market conditions, ULIPs give investors the opportunity to choose high-risk equity funds, moderate-risk balanced funds, and low-risk debt funds.
• ULIPs assist in meeting long-term financial objectives like purchasing a home, supporting your children's education, or saving for retirement. They serve as a means of generating money for the future. 
• ULIPs provide investment flexibility by letting you move between funds, make partial withdrawals, add cash to your investments, and reroute premiums based on changing financial goals.
• Premiums paid for a ULIP Policy are tax deductible under Section 80C up to a limit of Rs 1,50,000. Furthermore, the policy's returns are tax-free upon maturity, subject to the requirements outlined in Section 10 (10D) of the Income-tax Act.

 Tax Benefits of Investing in a ULIP Plan: 

Unit-linked insurance plans are emerged as one of the most popular insurance alternatives in India because of their multiple benefits. It provides a one-of-a-kind mix of investing and insurance, with a five-year minimum lock-in term, various fund alternatives, and the flexibility to transfer between them.

This enables policyholders to pick according to their risk tolerance while maintaining consistent returns throughout time. One of the primary benefits of ULIPs is that they provide tax breaks to policyholders, making them an appealing investment alternative.

The payable premiums for ULIPs are free from tax under Section 80C of the Income Tax Act, 1961, up to a maximum of Rs. 1.5 Lac.

Furthermore, any withdrawals made after the lock-in period under Section 10D of the Act are tax deductible. ULIPs are also free from Long Term Capital Gains (LTCG) tax, which contributes to the overall tax savings.

In contrast, profits from equity-related mutual funds beyond Rs. 1 Lac in a fiscal year are taxed at 10%. As a result, ULIPs are a superior alternative for tax savings.

ULIPs work by channeling premiums into multiple funds while keeping the fundamental insurance coverage. The lock-in period assures that the corpus retains the tax benefits on due premiums.

How to Utilize ULIPs for Funding Medical Emergencies?

During a medical emergency,  ULIP can provide a lump sum payout to the policyholder. If the policyholder is diagnosed with a critical illness, a ULIP with additional options to choose from that best suits your life stage and covers medical expenses without dipping into savings. 

A ULIP enables policyholders to invest regularly through systematic investment plans (SIPs), building a substantial corpus that can be used to cover medical expenses over time. Keeping the ULIP in force is important in case of a medical emergency, so you should pay your premiums regularly and not allow them to lapse.

It is important to be aware that surrender charges can be high when withdrawing funds from a ULIP to cover medical emergencies. It is best to plan ahead and set aside funds to cover medical emergencies. As a result, ULIPs can be a useful tool for funding medical emergencies, as long as the right ULIP is chosen, regular investments are made, and the policy is maintained.

Summing it Up

A ULIP is a flexible investment option that can be used to build an emergency fund for medical expenses as well as to fund other financial goals. Combined with their tax benefits, they make a great investment option for those who want to save tax while earning a return on their investment. Individuals should thus consider investing in a ULIP plan to ensure their financial future and prepare for any medical emergency that may happen.