A Unit linked insurance plan has been one of the most preferred modes of investment for a long time now. The numerous benefits that the plan offers ensure that it suits people of different age groups. If you are a millennial and are looking for a plan that offers robust growth and life cover, look no further than ULIP.
What is ULIP?
ULIP or unit-linked insurance plan is an investment instrument that offers the benefit of long-term growth and life insurance bundled into a single plan. When you opt for an ULIP plan, a portion of your premium is allocated to life insurance, and the remaining is invested in market-linked instruments. These can be equity, debt, or balanced. Depending on your risk appetite, you can set up a fund that grows with the market while also securing life cover.
Benefits of ULIP
On investing in a ULIP plan, you get access to the following benefits:
Long-term growth
ULIP plans usually have a lock-in period of 5 years. This makes way for discipline and allows for better growth due to the higher horizon.
Dual benefits
ULIP plans offer the perks of long term investment along with life insurance cover. Making it a win-win situation for the investors.
Help you achieve goals.
ULIPs are ideal for meeting your life goals. Whether you are looking to book a house, upgrade to a bigger category of car, fund your destination wedding, or plan for the education of your kids. ULIPs help you plan for these events more efficiently.
Tax benefits
Your investments in a ULIP plan offer tax deductions under Section 80C of the Income Tax Act. Likewise, the proceeds of the plan on maturity are tax-free under Section 10(10D). Fund transfer within ULIP plans remains tax-free under Section 45. Thus, offering multiple tax benefits.
Customisation
One major advantage of opting for ULIP is that you can change its underlying funds based on the market conditions. Should you sense that the volatility in the market is a bit unsettling, then you can opt for a more conservative approach. Alternatively, if you see a big potential, you can switch from debt funds to equity.
What is a ULIP calculator?
A ULIP calculator is an online tool that is designed to help you decide the approach for you to achieve your goals. By entering a few simple parameters, you can visualise how much your capital has the potential to grow. You can use the ULIP calculator to understand the investment needed for some of your goals as well. By providing details such as your investment amount, tenure, and expected rate of return, the calculator will let you know the corpus amount at the end of the tenure.
For example, if you want to accumulate INR 50 lakhs for booking a house in a few years, the tool will help you understand the amount that you should invest right now.
Ideal For Millennials
The inherent dual nature of growth and life cover makes unit linked insurance plan an exciting investment option. Millennials looking for stability or growth with life cover will find ULIP to be ideal. There are a few other interesting features of ULIPs. The top-up facility, for example, allows you to add funds apart from your chosen premium. This is a great way to invest any additional bonuses that one might receive.
ULIP plans allow their subscribers to switch between different fund types, typically without many restrictions. This ensures that you can switch from a debt fund to a balanced fund or a debt fund to an equity fund, depending on your assessment of the market.
The plans also allow for partial withdrawal, once you reach the 5 year lock-in period. Thereby allowing you to address any short term or urgent financial needs that one might have. And most importantly, ULIPs have been known to perform way better than some of the traditional savings schemes and other insurance plan types.
To make the most of your ULIP plan, here are a couple of simple tips.
Determine your financial goal.
Aiming for a goal is one of the fundamentals. This will allow you to have focus and motivation to meet the goal.
Understand the different charges that ULIPs have.
Unit linked insurance plan usually have a few charges such as administrative charge, allocation charge, management charge, mortality charge, etc.
Conclusion
The numerous benefits and flexibility make ULIPs a strong investment instrument to add to your portfolio. You can take the help of an ULIP calculator to understand how much your investments can potentially grow. On the other hand, it can aid you in the process of determining the investment that you need to make starting today to achieve a certain goal.
