The vertical of investment endows distinct options but one that piques the interest of NRIs (non-resident Indians) is ULIPs (Unit Linked Insurance Plans). ULIPs come across as an intersection of insurance and investing, providing both security and financial growth. For NRIs eyeing investing back home in India, ULIPs represent a unique choice. But what are ULIPs and can NRIs get themselves out of such plans?
A ULIP is a financial instrument that blends insurance with investment in market-associated assets. This dual advantage permits holders of the policy to safeguard their families while growing their wealth. The good news for the NRIs is they can indeed take part in ULIPs, making it a prudent constituent of their broader NRI Investment Plans.
Benefits of NRIs Availing ULIPs
- Life cover
One of the crucial facets of ULIPs is the life cover they offer, which is a safety net for the family of the NRI in the case of the holder’s untimely death. The insurance constituent ensures the family’s needs are secured and they are not vulnerable in the occasion of adversity.
- Diverse investment options
ULIPs offer distinct investment choices, involving equity funds that endow high risk and yield high return, debt mutual funds that endow low risk and yield lower returns and balanced funds that endow moderate risk and yield moderate returns. This diversity caters to distinct investment strategies and risk tolerance levels. An aggressive investor may prefer equity-concentrated funds, while a conservative one may lean towards debt mutual funds. The flexibility to select and modify the fund type depending on market conditions, as well as personal preferences, makes ULIPs a prudent instrument.
- Savings over long-term
ULIPs are structured to encourage an investment of long-term, which lines up well with financial goals such as saving for a kid’s education, or retirement planning. The ULIPs’ lock-in period fosters the habit of disciplined savings, which is essential for the long-term accumulation of wealth.
- Flexibility in premium payment
ULIPs provide distinct premium payment routes – single i.e., one-time, limited pay i.e., for a specified period less than insurance term, or regular i.e., monthly, semi-annual, or annual. This flexibility permits NRIs to select a payment choice that matches their financial scenario.
- Tax benefits
NRIs can get the benefit from tax exemptions as per Section 80 C on the premium paid towards ULIPs. Moreover, the maturity proceeds are usually tax-free as per Section 10 (10D), which is subject to specific conditions. Such tax benefits make the ULIPs option a tax-efficient product.
- Rupee denominated investment
As ULIPs are rupee denominated, NRIs can invest in the Indian currency, which assists them manage the risk linked with fluctuations in currency rates and make the investment procedure straightforward.
- Fund switching option
NRIs can switch their investments among distinct funds within ULIPs. This flexibility is advantageous in adapting to fluctuating market conditions or adjusting the risk profile to the changing financial goals and life stages.
- Liquidity through partial withdrawals
Most ULIPs permit partial withdrawals post a specific period generally five years. This feature offers liquidity features to NRIs, allowing them to address exigency needs with zero liquidating the whole investment.
- Transparency
ULIPs offer clarity in terms of charges, fees, and the performance of the chosen funds. This transparency aids NRIs in making informed decisions and tracking their investments effectively.
- Goal planning
ULIPs are highly conducive to goal planning. Whether it is saving for a kid’s education, purchasing a property or retirement planning, ULIPs offer a disciplined approach to attaining such long-term goals.
- Top-up Facility
NRIs have the option to invest additional amounts over and above the regular premium through top-ups. This feature is particularly useful when they have surplus funds and wish to increase their investment in the ULIP.
- Ease of tracking
The tracking and online management of ULIPs make it a convenient option for NRIs, helping them keep an eye on their investments anytime from anywhere, which adds to the ease of investment management.
- No geographic constraints
ULIP provide continuity even if the holder of the policy shifts their base to India or any other nation. This feature offers NRIs with complete flexibility of maintaining their ULIP investment regardless of their geographical location.
- Estate planning
ULIPs plan play an essential role in estate planning. The insurance constituent ensures a financial legacy for the holder’s heirs, helping in systematic wealth transfer.
- Rider benefits
ULIPs have the option of additional riders like accidental death cover, critical illness cover, etc. Such riders enhance the coverage, offering holistic protection over the basic cover.
- Potential for better returns with market linkage
As a part of the ULIP investment goes into the market instruments, there is great potential for higher returns than conventional endowment insurance policies. For NRIs seeking growth opportunities besides security, the market-associated growth facet of ULIPs offers an enticing avenue for higher returns, particularly in a rising economy.
- Wealth creation with insurance protection
ULIPs come across as a unique instrument that blends insurance protection and wealth creation features. While the basic goal for NRI might be to enhance their wealth via market-associated investments, having the added advantage of a life cover offers a safety net. This dual advantage makes ULIPs a holistic financial planning instrument, ensuring that the accumulation of wealth does not come at the cost of insurance protection.
- Adjustable cover over time
One of the lesser-known ULIPs benefits is the flexibility to adjust the cover over time. As the life circumstances of an NRI change, such as an increase in financial duties or family size, they have the choice to enhance the sum assured. This adaptability ensures life cover keeps pace with the changing phases of life and financial obligations.
Conclusion
ULIP Plans emerge as a compelling choice for NRI Investment Plans. They offer a blend of investment and insurance, adaptability to individual financial goals, and significant tax advantages. NRIs seeking to capitalise on investment opportunities while ensuring financial security for their families will find ULIPs a worthy avenue. In a vertical of fluctuating markets and uncertain futures, ULIPs stand as a crucial product of balanced financial planning for the global retail investor.