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A sound financial plan should have a correct balance between insurance and investment. But what if we tell you that there is an insurance policy that also offers you the benefits of investments. Let us understand this plan in detail.
ULIPs are primarily an insurance product that offers the benefits of investments to its users. Ideally, the policy allows you to invest in different types of funds – debt, equity, and a combination of the two. You can choose fund investments based on your risk appetite at the given moment.
But to gain good returns, it is suggested to invest in long-term ULIPs. Moreover, if you are a bachelor, ULIP is a great way to build your wealth over time. The following are five reasons why bachelors should invest in a ULIP plan.
- Takes care of the financial liabilities
Many young adults have financial liabilities such as student loans to repay and ULIPs help you meet such responsibilities with ease. We understand that you have just started a career, and the money you earn might be just sufficient to make a living.
Contributing religiously towards ULIPs will make sure that your student loan is paid off on time. Moreover, doing so will release the financial burden from your parents’ shoulders. On the other hand, such an investment comes in handy in the event of your premature dismissal as well.
- Offers tax benefits
The premiums paid towards the ULIP investment can be claimed for tax deductions under Section 80C of the old income tax regime. Furthermore, the maturity and death benefits received on the policy are tax-free under Section 10(10D) of the Income Tax Act, 1961.
On the other hand, ULIPs are also exempted from the LTCG (Long Term Capital Gain) Tax. Thus, it makes it a worthy investment choice for bachelors who are looking to save money on tax.
- Helps achieve long-term financial goals
Each person has certain aspirations and goals that they plan to achieve. But to accomplish these goals on time, bachelors must plan their future finances. ULIPs are known to be goal-based investment instruments. So, whether you want to save for your big wedding, your first home/car, your child’s educational future, your child’s marriage, or your retirement – ULIP has you covered.
The key feature of ULIP investments is that you stand to benefit from the compounding of your investments. In other words, the returns earned are reinvested in funds to generate higher outcomes. With ULIPs, you can choose to exit the policy after the completion of the lock-in period or continue to reinvest your money for a longer duration.
The ULIP plan returns earned will make sure that all your aspirations and future financial goals are accomplished with ease.
- Offers flexibility
Now when you buy ULIPs, you are a bachelor with no family (other than parents) to take care of. In the near future, you may want to get married and start a family of your own. We understand that as you grow older, your priorities tend to evolve.
ULIP investments make sure that you are enabled to make changes to your portfolio as per your rising responsibilities. ULIP offers a fund switching facility to the investors. You can switch from equity to debt and vice versa, depending on the market performance of the funds to yield higher returns in the future.
- High Returns and fewer charges
ULIPs earn great returns when invested for a long time. Moreover, the charges applicable to the policy are less. Some of the ULIP charges that you need to know about are the premium allocation charges, fund management charges, surrender charges, etc. These are predetermined values as per the revised Insurance Regulatory and Development Authority of India (IRDAI) guidelines.
To Conclude
Based on the above five reasons, it must be clear that ULIPs are an ideal investment strategy for young investors.
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