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A Quick Guide To ULIPs

Updated On Oct 18, 2021

Our population of millennials is the world's largest. With their purchases of goods and services, they are currently driving the consumer economy. Millennials, on the other hand, do they save or invest?

They do, in fact, Working millennials invest only in risk-free investments, according to one-third of them. In terms of their hard-earned savings, they take fewer risks than their elder counterparts do. The economy is changing as a result of this generation's efforts. In this case, a ULIP would be a safe enough investment plan for young people, but it would still be a step up from fixed-income savings. This is a guide to ULIPs for Indian millennials.

A Quick Guide To ULIPs

The following are the basic things in a ULIP:

  • Risk Appetites Are Different

When it comes to picking and switching investments, ULIPs offer a lot of flexibility. Your investment can have a percentage of equity ranging from 0% to 100%. ULIPs offer benefits such as life insurance coverage, a guaranteed bonus, and higher returns when compared to fixed deposit securities.

  • Target Objectives

You must have a lot of future ambitions as a young, ambitious person, such as buying a house, a vehicle, getting married, getting a higher degree, and so on. If you want to invest for a long time in order to achieve these goals, a ULIP plan is a smart choice.

  • Maintaining Market Awareness

A ULIP necessitates market monitoring in order to determine how well your fund is performing and how to adjust allocations. ULIPs are for you if you want to keep current.

  • ULIP Cost

A ULIP has a number of fees that are taken out of your premium. Depending on who your assurer is, the number and amount of charges may vary. Administrative fees, fund management fees, surrender fees, mortality fees, partial withdrawal fees, switching fees, and so on are examples of these fees.

  • Tax Advantages

A ULIP is an excellent investment plan for young people who have only recently begun paying taxes and are learning how to save. Section 80C allows premiums to be deducted up to Rs.1.5 lakh, whereas Section 10(10D) of the Income Tax Act exempts the maturity amount.

Other Advantages

  1. ULIPs are a great investment option for young people since they let you pay your premiums in a variety of ways, including monthly, quarterly, semi-annually, and annually.
  2. They provide you with the power of compounding, which means that profits are re-invested for future gains.

How Do They Function?

Your premium is split into two parts when you have a unit-linked insurance plan. A portion of your payment is used to cover your insurance, while the remainder goes into a common pool for investing in market products like stocks, bonds, and mutual funds. Fund investments can be all-equity, all-debt, or all-hybrid. The nice thing about ULIPs is that you can pay your premiums monthly, quarterly, biannually, or annually, depending on your needs.

Conclusion

Investing in a ULIP at the start of your career can help you achieve your goals sooner. With the right investment strategy, your dream vacation in your 30s could become a reality. They enable you the freedom to switch from equities to debt to balanced funds at nearly any time, depending on the performance of your investments.

Although they have a 5-year lock-in term, the main benefit of ULIPs comes from investing for a long time. It instills in people the habit of saving money and sticking to it.

Also read: 

Are ULIPs A Good Investment Option For Long Term Wealth Creation

5 ULIP Charges You Must Know About

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard. 

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