Best Reasons To Take A ULIP Early On
A unit linked insurance plan (ULIP) is essentially a life insurance plan that also has an investment component to it. The money in the investment component is invested in stocks and shares of publicly listed companies. This means that when you take a ULIP, you not only get life insurance coverage but also you give yourself a chance at increasing your wealth.
How does a ULIP work?
ULIPs plan are investment focused. Being a market-linked product, investment from a ULIP is diversified across portfolios in the open market. Returns of the ULIP are dependent upon the performance of the stock and also the condition of the market, economy etc. If the stocks do well and the market is favorable, your plan generates more income. ULIP has all features of a life insurance policy such as death benefit, maturity benefit; added to it are bonuses such as terminal bonus, discretionary bonus.
What are the top benefits of investing in ULIP?
Flexibility
You can choose the premium you wish to pay and the frequency of payment. You can choose to diversify your investment across one fund or multiple funds. Suppose you are a seasoned trader or share market investor. In that case, you can choose to allocate or reallocate funds in the ULIP based on market conditions. Depending on market conditions, you can switch between debt funds or equity. The former is safer but yield lesser returns; the latter is riskier but has the potential to yield higher returns.
Liquidity
ULIPs have lock-in periods. Depending on the policy, the lock-in can be for a period of 3 to 5 years. You can withdraw money from your ULIP plan. Depending on the money withdrawn, the ULIP plan coverage is recalibrated, and so are your premiums. Therefore, when you are in need of urgent funds, you can use your ULIP accumulated funds to withdraw money.
Systematic savings
You can use ULIP for systematic savings. A chunk of your income can be reserved for investing in a ULIP product. You can then continue investing in the product, and later get a huge lump-sum at policy maturity.
Wealth accumulation
A ULIP is guaranteed to accumulate wealth over the long term. Short term market conditions are temporary. Wealth managers of ULIPs always pick stocks that have performed consistently over a period of time. Your money is invested in these 0stocks so that with time, the stock value increases, and so does your wealth.
Tax benefit
Premiums paid for a ULIP can be covered under Section 80 C for a tax deduction. Even the maturity lump sum corpus received is exempt but subject to conditions under Section 10 (10 D) of the Income Tax Act, 1961.
Why should a ULIP be taken very early on?
If you can take a ULIP in your twenties, then by the time you retire, you can be assured that you retire wealthy. Because you would have accumulated double the money invested over this long period of time, therefore it is always advisable to take a ULIP as soon as possible and be willing to keep it locked for the long term until it reaches maturity.
