We are always advised to start saving and investing in different policy schemes from a very young age. There are different benefits of investing from a young age. Good returns for a secure future, better habits of savings, and managing expenses are just a handful of benefits. While there are different modes of investing, only one financial instrument offers you the dual benefits of investment and insurance together: A ULIP policy. But what is ULIP? And why should you start investing in it from an early stage?
Read more to get a better understanding.
What is a ULIP?
A ULIP policy or unit linked insurance plan is a life insurance policy in which you get benefits of investment and insurance. A part of the premium paid is used in providing life cover to your loved ones. The other part of the premium is used for investing in market funds, namely equity and debt fund. You can choose to invest in either fund or both of them, based on your risk appetite and what your life goal is.
What are the benefits of early investment?
Let’s take the example of Rohan. Rohan is 23 and just got his first job in a good company. He is being offered a good salary. Rohan’s father advises him to invest in ULIP because of its benefits that he can enjoy in the long run. After doing a little research, Rohan understood what benefits his father was talking about. Here a few benefits you should know about:
- Helps in wealth gain
Each individual has a different life goal they want to accomplish. Securing the future of their child, buying, or building their dream home, wanting to go abroad or paying off loans, are just some of the life goals people have. In order to accomplish these goals, you will require a good amount of wealth. Merely depending on savings is not enough. Neither is taking loans, as both these options could cause a financial burden in the future if not managed properly.
Investing in ULIPs ensures that no matter what your life goal is, it is accomplished without any hassles. This becomes more convenient when you start investing from a young age. ULIPs are designed for providing you benefits in the long run. When you opt for a long-term ULIP plan, the returns that you get are higher compared to a short-term plan. Especially when you start investing from a young age. The returns you gain if you start investing from the age of 25 could be far greater than when you start investing at the age of 30 or 35.
- Saves tax
Among the ULIP benefits, tax savings is a major one. The premiums that you pay for the policy are tax exempted under Section 80C of the Income Tax Act. If your total
premium value is up to Rs.1,50,000, you are eligible for this tax exemption. Also, the maturity benefits that you get from the policy are also tax exempted under Section 10(10D). If you opt for partial withdrawals from your funds, they can be tax exempted as well, under certain conditions of Section 10(10D).
If you start investing early in the policy, you could end up saving more than spending more in later years. Early investment also allows you to increase your premium when required. This can be done with the help of a top-up premium. If the top-up done is within the exempted limit, you could get more gains without paying any tax.
- Adjusts as per your life goals
As mentioned earlier, life goals can be different for everyone. However, at different stages of life, your life goal could change, or an extra goal could get added. In such situations, you can do a partial withdrawal. This means that a certain amount, up to a limit, can be withdrawn from your funds based on your requirements. The withdrawn amount will be restored to your sum assured after a pre-defined time period. Similarly, you have the option of reallocating your investments from one fund to another with the help of switching option. This enables to manage your investments as per your immediate requirement.
So, just like Rohan, you can also reap these ULIP benefits when you start your investment at an early stage. If you are planning on investing in ULIPs, you take assistance of the ULIP return calculator to get a rough idea about the investment and returns as per your requirements.
Also Read: Is Automated Equipment A Good Investment
Leave a Reply