A Detailed Guide On Unit Linked Investment Plan (ULIP) For Young Professionals

ULIP for young professionals

Before choosing plans for your investment portfolio, it is prudent to look at 2 aspects. First, your portfolio should have plans that provide financial security and second, it should offer long-term wealth creation. If you are planning your investment portfolio, read on to learn about ULIPs that provide you the dual benefit of financial security as well as wealth creation.

ULIPs are one such investment plan that provides you with the benefits of insurance as well as capital growth. This is a market-linked product which means it involves risk. The policyholder bears the risk as the investments in the sectors are decided by the risk appetite of the policyholder. The policyholder can choose between high-risk to medium to low-risk plans for their ULIPs. Here is why you should invest in ULIPs.

  • You can closely track your investments: Investors can closely see the performance of their funds and can switch between funds of different risk profiles.
  • Ideal investment plans for medium to long-term investors: ULIPs can give you better returns if you are invested for a longer period. Investors who wish to get higher returns and can stay invested for a longer duration can invest in ULIPs.
  • You can have varied risk profiles: ULIPs allow you to invest in varied risks right from equities to debts. Equity funds offer higher returns but have higher risks, making them an ideal investment for aggressive investors. Debt funds are comparatively more stable and are ideal for risk-averse investors.
  • Investors of all ages can invest: ULIPs have various plans that suit your varying needs at different ages. Irrespective of your age, you can always choose to invest in ULIP plans that suit your financial liabilities at that point in time.

What are the features of ULIP?

1. Offers insurance and investment in a single plan

ULIPs are designed to help you acquire maximum capital growth through market-linked products. Along with increasing your wealth ULIPs also provide death benefits to the family of the policyholder.

2. Option to switch between funds

ULIPS allows you to switch between funds for a specific number of times during the policy period. These permissible number of shifts can be done without any additional charges. Also, the number of free switches varies across all insurers and is mentioned in your policy document.

3. Premium redirection option

You can redirect your future premium to any funds of your choice. You have to provide your policy number and specify the funds to which you want to allocate your future premiums. You can also specify the premium percentage that you want to allocate to each fund.

4. Partial withdrawals

ULIP plans have a lock-in period of 5 years during which any withdrawals would require you to incur additional charges. However, you can partially withdraw after 5 years without any additional charges.

Final word:

ULIPs provide you the dual benefit of insurance and capital growth by investing a part of your sum for life cover while the remaining amount is in funds of your choice. Besides the benefits of capital growth, you also get tax benefits under Section 80C, making it an ideal investment option for taxpayers.