ULIP plans for young adults: grow your money and save on taxes

A statistics survey reveals that nearly a third of the working millennials in the country only prefer to invest in simple, risk-free modules. They are strongly risk-aversive. However, the current generation prefers to go to certain risky extents to ensure enhanced wealth-building. They are gradually altering the economic interface of the country by bringing certain changes. Considering all these factors of security and market-linked savings, young adults are growing more interested in choosing ULIPs for their investment purposes.

What is ULIP?

Before discussing all these details, we first need to maintain a clear understanding of what is ULIP. ULIP is the abbreviated form of Unit Linked Savings Plan. It is a unique financial instrument that combines both the security of insurance and the wealth-building opportunities of a market-linked investment tool.  The part of the premium paid towards this scheme goes for life coverage protection, while the remaining part gets invested in the market based on your choice and preference.

You must consider your risk appetite, financial goals, and current financial status before deciding upon this investment.

You need a long time whatsoever to build a sufficient wealth corpus. ULIPs encourage regulated and consistent savings regularly that accumulate to build a significant amount in the long run. You can utilise this fund to fulfil several purposes like buying a house, planning for retirement, a child’s education, a child’s marriage, buying a new car, etc. It encourages disciplined savings and aids in maintaining a healthy financial portfolio.

ULIP investments for young adults

ULIP plan is an ideal investment tool for young adults. This is more so because they usually have to share much fewer family responsibilities. You will benefit best from any ULIP plan under the following circumstances:

1. Having specific goals:
   As a young professional who has just joined the professional world and started earning, they seem to remain tempted to splurge on unimportant luxuries. However, this habit will keep you broke in the long run if you do not inculcate discipline from the initial stage. Considering all these factors, it is best to begin ULIP investments as early as possible. This will help you grow a significant corpus that will benefit you in the long run.
2. Varying risk appetites:
   You can take comparatively more risks when your responsibilities and liabilities remain low. This will ensure enhanced gain, allowing tax benefits. Unlike static financial tools like savings deposits and fixed deposits, ULIPs ensure market-linked savings along with insurance protection security. Moreover, you will receive guaranteed bonuses and enhanced returns.
3. Market trackers:
   You must keep an eye on the market after your ULIP investment. This will help you track the overall performance of your investment. You can make the necessary additions and alterations based on your choice and market conditions, such as fund switches, according to the results.

What is the best method to purchase and manage ULIPs?

The ideal method to purchase a ULIP plan for current generation tech-savvy young adults is through the online mode. You simply need to visit the official website portal of your chosen insurance provider.

However, your choice must never be random. You have to undertake in-depth research among several competent plans and their benefits and premiums before finalising your choice that will suit your purpose the best.

Before investing, utilise the power of a ULIP calculator to get a concrete insight into the future of your investment(s). Once you enter the basic details of your investment like the premium amount, tenure, investment amount, etc., it will reveal the maturity amount.

Pay your premiums securely using any online reliable mode like debit card, credit card, e-wallet, UPI, etc.

You can easily keep track of your investment(s) using the digital mode, and switch your funds to keep it in sync with your targets and requirements. In short, online mode ensures easy fund management.

What are the charges for ULIP?

Before investing, you must note that there are several charges for a ULIP investment, that gets deducted from the premium you pay. This deduction amount and frequency are decided by your chosen insurer and it varies from one company to another and the plan variant.

Some of these charges include fund management, administrative charges, mortality charges, surrender charges, switching charges, charges for partial withdrawals, etc.

Benefit of ULIP

Some of the major benefits of ULIP plans include:

1. Tax benefits: Up to INR 1.5 lakhs, the premiums remain tax-deductible per annum u/s 80C. On the other hand, the maturity amount enjoys tax exemption under Section 10 (10D) of the IT Act of 1961.
2. Flexibility: ULIPs allow flexibility in premium payment. You can pay it according to your convenience either monthly, quarterly, annually, etc. Apart from this, you also enjoy the flexibility of fund switching and rebalancing your funds among debts, equities, and hybrid funds.
3. Better returns: ULIPs allow you to enjoy better returns through the power of compounding. This means that the accumulated profits get automatically reinvested to ensure enhanced profits and allow you to enjoy better returns.
4. Lock-in: Usually, ULIPs maintain a lock-in period of 5 years. This allows you to stay invested for a significant period and enjoy the benefits of wealth creation.

Conclusion

ULIP investment at an early age during the beginning of your career will aid you in fulfilling your dreams and other targets at an early age.

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