ULIP: New-age Investment Plan to Create Wealth
Unit-linked Insurance plans or ULIPs are being recognized as the ideal investment option for millennial investors with long-term investment objectives.
What are ULIPs?
When you invest in ULIP, the insurer invests a part of your money in shares/bonds and utilizes the remaining amount to provide an insurance cover. Thus, ULIPs offer the benefits of both the insurance as well as mutual funds. It is a great option for wealth planning and meeting your retirement needs. You can invest in pure debt, pure equity, and balanced funds through ULIP.
The 4G ULIPs
Unlike the previous ULIP plans, in the 4G ULIPs, you need not worry much about the costs. Most of the insurers offer the best ULIP insurance plan with no premium allocation charges, switching charges, or mortality charges refunding.
With all the improved regulatory changes the 4G ULIP offers a lot of benefits to the young investors. The 3 key benefits of 4G ULIPs are listed below:
1. Wealth creation
The fourth-generation ULIP lets you earn money as well as get an insurance cover through a single product. The ULIP can generate more wealth if you switch between funds and use the premium redirection facility to its fullest. Among other insurance products available in the market, ULIP is considered the best tool for wealth planning.
Mainly, 4G ULIPs with all the changes is the best investment option for young investors. You can initially plan to invest in equity and when you are nearing your retirement age, you can move your investments to debt funds. This can give you assured returns.
2. Long-term investment with higher returns
The ULIPs come with a 5 year lock-in period. However, it is always advisable to invest in the ULIPs for a longer period to get higher returns. Your money will be reinvested as the principal amount to grow persistently. Furthermore, if your investment is linked to any financial objective, it's always a better option to invest for a longer period.
For example, if you start investing Rs.5000 per month from the age of 25, you'll get approximately Rs. 60 to 70 lakh when you turn 50 at 10% interest. However, if you start investing from the age of 35, you'll get only around Rs. 20 lakh at the age of 50 with 10% interest. Thus, starting a ULIP investment at a young age is a smart decision.
3. Tax saving
The most important benefit of ULIP is its tax benefits. The tax benefits are available at the time of investment as well as maturity. The investments made in ULIPs as well as the returns are deductible from the taxable income.
With their high return yielding characteristics and easy switch options, investing in the best ULIP insurance plan is the solution to every young investor.
