Much has been written and spoken about ULIPs and many people consider ULIP as an ideal investment option. What makes it a smart option in the volatile market? To begin with, ULIP is a product that serves dual functions. One, it helps grow your wealth and secondly, it offers an insurance cover on your life. The amount you invest in a ULIP is bifurcated into two parts; one part goes into a fund that invests into the various asset assets and the other part towards your life insurance cover.
One of the top reasons why ULIP is an ideal investment choice for millennials is the fact that it is exempted from long-term capital gain tax. ULIP is clearly the gateway to equity fund investments. It is a product, which offers a combination of returns of investment and life insurance coverage along with a tax benefit. Millennials are always on the lookout for products, which offer high returns and do not have a huge tax liability. ULIP has a five-year lock-in period, which will ensure that you do not withdraw the money at the first chance and it will inculcate a habit of saving. ULIPs are feasible, which makes them the top investment choice for many. They offer a number of benefits and are hence worth the time and money you invest.
Benefits of ULIPs for millennials
Listed below are a few advantages that you would get while investing in ULIPs.
Return of mortality charge
Since ULIPs are hybrid in nature, they offer insurance and investment under a single plan and they have a premium. This premium amount includes the mortality charge, which covers your life insurance. Now that insurance companies have changed their outlook towards ULIPs, there are insurance companies such as Bajaj Allianz Life, which offer ‘return on mortality change’ when the plan matures. This means that you can receive the entire mortality charge back at the time of maturity of the plan. In a way, you get a free life insurance cover.
Switch between funds
In a ULIP, you are allowed to switch between different funds and grow your investment as per your requirement. It will help maximize the value of your returns and you can choose between equity, debt, and balanced funds to invest in. If you invest in equity and incur losses, you can switch into a debt fund and save yourself from incurring more losses. You can switch between funds without incurring any charges for the same. Based on your risk appetite, you get to choose between four to eight funds for your switch.
Tax benefits
The biggest highlight of the investment product is the tax-saving ability. When you make an investment and pay the premium, it is deductible from your taxable income under Section 80C up to an amount of INR 1.5 lakh. In addition, the returns from the investment are also exempted from your tax under Section 10 (10D).
Online purchase offers convenience
Purchasing ULIP online not only allows you to compare between products and make the best choice but also ensures that there is a zero cost of investment. ULIPs can be purchased without any commission. The only charges that will be applicable include the fund management charges and mortality charges. Many companies such as Bajaj Allianz Life also reverse the mortality charge. Hence, if you do your research well, you can purchase the best ULIP plan as per your needs. Like most millennials, you need to get online and do your research to find the best ULIP plan. You can also manage your funds online with convenience and ensure that you are constantly updated about the performance of the same. If you want to switch the fund, you need not contact the agent or head to the branch office for the same. You can manage this process online without any hassles.
ULIPs are easy to purchase and the risk can be mitigated due to the fund switching option. They have the potential to generate high returns over a long tenure. You can also use the ULIP return calculator to estimate the amount of returns it will generate with a specific rate of return. The calculator is available online and is easy-to-use. You need to provide the premium amount and the tenure of the investment to learn more about the expected returns. You can compare the past performance of different funds to choose the one that is apt for your needs.
If you are looking for an investment product that is easy to purchase and has a high return, ULIP is perfect for you. It is an ideal solution to millennials who have started to earn and are looking for investment options but do not want to risk the volatility of the market, as a ULIP plan offers the option to switch the funds as per market conditions. ULIP returns in 10 years have remained consistent and the investment into different funds has increased over the years. This shows that millennials are keen on investing into products that can help meet their financial goals.
When you invest in a ULIP, you need to remain invested for a long tenure. You cannot expect your fund to grow overnight. If you remain invested for a longer tenure, you will be able to overcome the market volatility and the long-term returns will even out the ups and downs. You need to be very patient with ULIPs as they as an investment option help in achieving your long-term life goals. You need to choose plans based on your goals and risk appetite. You can choose an equity plan, a debt plan, or a balanced plan and make your investment accordingly.
One response to “ULIP – First Step Towards Investment Journey for Millennials”
ULIPs come with a lock-in of five years which can help you inculcate a habit of disciplined investing. Since ULIP is a long-term insurance contract, investing in a single ULIP helps. Unlike ELSS, the policy is bought once while the tax benefit can be availed every year till the end of premium paying term.