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Investing in ULIP| Finserv MARKETS

Investing in ULIP: Investment Guide for Young Adults

Earn interest up to 7.75% p.a. by investing in a Bajaj Finance Fixed Deposit | Rated CRISIL AAA/ STABLE and [ICRA]AAA(stable)

29 Sept 2021
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Young Professional’s Guide to Investing in ULIPs

As India’s millennial workforce grows, insurance companies are coming up with innovative investment plans that also prioritise safety to appeal to the new generation of young professionals. With a higher disposable income than the generations before them, young professionals today are looking for ways to invest smarter. Unit Linked Insurance Plans have emerged as a preferred choice of investment for many working professionals, owing to their flexible nature and higher tax benefits.

 

ULIPs can be utilised for a variety of investment plans due to their unique ability to not just help save your money but also grow your wealth. The most appealing aspect of a Unit Linked Insurance Plan is the guaranteed life cover it provides. In this article, we’ll take a look at what a ULIP plan is and how you can use it for investing safely while getting life insurance coverage.

What is a ULIP?

A ULIP or Unit Linked Insurance Plan is a unique plan that provides the policyholder with dual benefits. The plan has two parts- a life insurance cover and an investment tool. When you pay your premiums to the insurance company, part of your payments go towards the life insurance cover, whereas the remaining funds are allocated towards safe investments as chosen by you. A ULIP plan is an excellent way to invest wisely over the long term and protect your family and loved ones with life insurance.

Benefits of Buying a ULIP

There are several benefits of buying a ULIP that you should be aware of:

 

  1. ULIP is a good option for younger people to invest in, as the investments will compound over the years and leave you with a handsome amount of funds at the end of the policy.

  2. You can use the funds from ULIP maturity towards fulfilling your and your family’s financial goals such as sending your kids abroad for studies or use the funds to invest in real estate, etc.

  3. ULIP is a flexible plan, meaning you have the option to choose where your investments will go. You can choose to invest your funds between equity and debt assets.

  4. There are also tax benefits that come with a ULIP plan. Premiums paid on a ULIP plan are tax-deductible to a limit of 1.5 lakh per year, under Section 80C of the Income Tax Act, 1961. Moreover, the maturity amount you get at the end of the policy is also tax-exempt under Section 10D of the IT Act.

Why Should You Invest in a ULIP?

Here are the main reasons why you should consider investing in a ULIP plan:

 

  • Allowing your money to sit idle in your bank account is a sure-shot way of losing out on a tremendous opportunity for wealth creation that ULIP provides.

  • By investing in a ULIP plan, you are guaranteed the dual benefits of insurance cover as well as generating returns from market investments.

  • Along with tax-deductible premiums and tax-exempt maturity benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961, Unit Linked Insurance Plans are also exempted under the newly introduced Long Term Capital Gains (LTCG) tax.

  • The funds you receive at maturity can be used as a retirement fund or used elsewhere as and when needed.

To Conclude

Youngsters, especially, are in a good position to take advantage of a ULIP plan to build a financial safety net and secure their future. With the power of compounding interest, your ULIP investments will grow every year and help you create a large corpus for your future. With the tax benefits and life insurance cover that ULIP provides, it is a great investment choice for you. You can take a look at the various ULIP plans available on Finserv MARKETS and choose one that suits your and your family’s needs. 

FAQs on Investing in ULIPs

  • ✔️Are ULIPs a good investment?

    ULIPs are good investments for individuals who are looking to invest for the long term in an investment plan. The life insurance cover is also a very useful feature if you are financially supporting your family. 

  • ✔️What is the full form of ULIP?

    ULIP stands for Unit Linked Insurance Plan. A ULIP provides life insurance cover along with an avenue for long term investments. 

  • ✔️When can you withdraw funds from ULIP?

    You can partially withdraw your funds from your ULIP plan after the completion of 5 years. However, you should ideally let your ULIP funds untouched till maturity for the highest returns.

  • ✔️Are ULIP gains tax-free?

    Yes, as per Section 10D of the Income Tax Act, 1961, benefits received from ULIPs are tax-free. Even the premiums you pay towards your ULIP plan are tax-free to the extent of Rs. 1.5 lakh per year under Section 80C of the Income Tax Act. 

  • ✔️What is meant by the lock-in period in ULIP?

    The lock-in period in ULIP refers to a period of 5 years starting from the time you buy your policy where you cannot withdraw the funds you have invested.