How to Choose the Best ULIP for Self-Employed Women and Freelancers?

If you are a self-employed or freelance woman, you already know how to hustle and make things happen for you. But among all these actions, it gets easy to push your financial planning to the bottom of your to-do list. This is exactly where Unit-linked Insurance Plans, better known as ULIPs, come to your rescue.

ULIPs offer both life coverage and investment aspects in one solid package – so your money will work for you, providing you with total peace of mind knowing that your dependents will be financially stable in case something unfortunate happens to you. Now, not all ULIPs are created equal. Choosing the right one can make a huge difference. This article will walk you through what unit-linked insurance policies are, how they work, what to look for, and how ULIP maturity taxation can be a game-changer.

What is a Unit-Linked Insurance Plan?

Unit-linked insurance plan is a type of life insurance policy that provides both life insurance and investment aspects. When you buy a ULIP, a section of your premium is allotted for life coverage while the other gets invested in market instruments – equity, debt, or even a blend of both, depending on your risk appetite and the plan you have picked. The policy even provides tax benefits, which makes it a great choice.

What are the Benefits of ULIPs?

Traditional corporate jobs come with perks like EPF, corporate insurance, and occasional bonuses amounts. However, when you are a freelancer or self-employed, you need to create all these financial safeguards yourself. Here’s why a unit-linked insurance plan might just be what your portfolio needs:

1.     Dual Purpose

Think of unit-linked insurance policies as the financial equivalent of a stylish convertible that also gets great mileage. The policy provides you with:

○       Insurance coverage, in case life throws a curveball at you.

○       Investment opportunities, to make sure your money earns you more money.

2.     Flexibility

Most ULIPS provide a flexible financial plan to you when you decide to invest in them. According to your financial requirements and risk appetite, you can decide between a combination of equity, debt and other instruments. Some policies even offer partial withdrawals, enabling you to be financially prepared for any emergency.

3.     Long-Term Growth

Unit-linked insurance policies come with a lock-in period of 5 years. This encourages the policyholder to build discipline and stay invested for a long time, great for building wealth steadily with a little bit of market risk involved.

4.     Tax-Benefits

The amount that you pay as insurance premiums is eligible for tax deductions up to a limit of Rs. 1.5 lakhs under Section 80C. ULIP maturity taxation is also exempt as per the 1961 Income Tax Act Section 10 (10D), given that your annual premium amount is less than Rs 2.5 lakhs. But if the amount exceeds the limit of 2.5 lakhs, your gains will be taxed like capital gains – at 10% on amounts over Rs. 1 lakh.

How to Choose the Ideal ULIP?

Here is a list of dos and don’ts when shopping for unit-linked insurance plans:

Do’s:

1.     Know your why: Start by knowing your goal. Is this for your retirement? Is your primary goal life cover? Your financial goal and financial target will majorly shape your ULIP.

2.     Compare charges: ULIPs come with their own set of fees, like premium allocation, fund management, mortality charges and others. Always ask for hidden charges and compare policies.

3.     Check flexibility: Life changes, the market fluctuates – your ULIP should keep on with all of these. Pick a policy that allows free fund switches.

4.     Look into the insurer: Compare your insurance provider’s claim settlement ratio and response time before deciding on a plan.

5.     Ensure affordability: Make sure the premium that you decide on is something you can pay without any problems. Don’t stretch yourself to a high-premium plan.

Don’ts:

1.     Ignoring the fine print: Lock-in periods, fund switch limits, other charges – know them all.

2.     Overcommitting on premium: Don’t commit to a premium amount that you can’t manage.

3.     Chasing returns blindly: Do not chase maturity returns that don’t align with your risk tolerance. The investment aspects need to be about consistency and balance.

Conclusion

Being self-employed gives you complete freedom in your career, but this also means you are the CEO of your own future. A well-chosen ULIP can tick multiple boxes – life cover, long-term investment, and tax benefits – all under one umbrella. But remember: it is not about picking the first product that you come across or the flashiest policy that insurance agents try to sell you. It is necessary to get a ULIP that works for you – your budget, your goals, and your lifestyle.

So go ahead – compare, plan and pick a plan that helps you build your legacy while enjoying peace of mind knowing all your dependents are taken care of financially.