A Young Professional’s Guide to ULIP Investment

 A Young Professional’s Guide to ULIP Investment

Young people form around 34% of the population in India. Besides this, 46% of the youth comprise the country’s working force.It is advisable for them toinvestin a financial product that can help them increase their wealth over time. One of the best investment instruments available for the younger generation is the Unit-Linked Insurance Plan (ULIP). If you are wondering what is ULIP, then read on the following guide.

ULIP is a type of life insurance plan that secures your life and provides the facility of investment. It is recommended that you remain invested in ULP for a minimum of 10-15 years, as it enables you to accumulate a significant corpus to help you meet your financial goals.

Why should youngsters invest in ULIP?

You can consider investing in ULIP at a young age because:

  • It can help meet specific financial aspirations 

When you are young, you are ambitious, and the expenses are relatively less, as you have not yet started a family. Therefore, you can invest a part of your income in ULIP to accomplish life goals, like buying a house or car, or going for a dream vacation, among other objectives.

  • It lets you invest as per your risk-taking capacity

ULIP investment allows you to choose the type of fund you want to invest in and offers the flexibility to switch from one fund to another. Based on your risk-bearing appetite, you can invest in risky equity funds or less-risky debt funds. At a younger age, you are more capable to take some risks. So, there is a higher possibility of growing your wealth, by earning better returns from investments in various funds.

How can you buy and manage your ULIP investment? 

One of the best ULIP benefits is that you can purchase and manage it online. As you are tech-savvy, you can easily buy a ULIP by paying the premium online. Besides this, you can monitor the fund’s performance, which permits you to transfer your ULIP investmentfrom one fund to another to avert any risks due to the equity market’s uncertainty.

What are the various charges associated with ULIP?

Here is a list of costs that you should know before investing your hard-earned money in ULIP:

  • Premium Allocation Charge
  • Administration Charge
  • Fund Management Charge
  • Discontinuation Charge
  • Partial Withdrawal Charge
  • Mortality Charge
  • Premium Redirection Charge
  • Fund Switching Charge

Tax benefits of ULIP 

According to Section 80C of the Income Tax Act, 1961, the premium paid towards the policy is tax-free up to INR 1.5 lakh per annum. Additionally, the amount that you receive on maturity is exempt from tax as per Section 10 (10D) of the Act. Also, the death benefit that your nominee will receive will be tax-exempt under this section.

Advantages of investing in ULIP 

You can invest in this instrument, as it offers the following ULIP benefits:

  • Flexibility to pay the premiums in monthly, quarterly, semi-annually, and yearly installments
  • Opportunity to earn higher returns as compared to other investment alternatives
  • ULIP investment offers the possibility of switching from one fund to another
  • Chance to save from an early phase of life tobuild a huge corpus in the long run
  • Probability to multiply your wealth with the power of compounding; however, you need to remain invested for a longer duration

Now, when you know a lot about ULIP and how it can help you can build a substantial corpus from it, you need to think seriously about securing your financial future. Search for the best ULIPs that can meet your economic ambitions and start your investment journey today.