May 20, 2024

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Benefits of Investing in ULIPs at an Early Age

It is advisable to invest your hard-earned money in financial products that can grow your wealth and help you secure your economic well-being. Planning for such an investment, if done right from an early age, inculcates the habit of savings and allows you to earn better returns in the long run. 

At a young age, you can take the risks of investing more in the equity market. If you stay invested with a long-term perspective, your funds can increase with time. Besides planning for a better financial future, it is necessary to secure your life. The hectic lifestyle has made life unpredictable. Therefore, it is essential to insure your life and provide your loved ones with the much needed financial protection in case something unfortunate happens to you. So, it is wise to invest your hard-earned money in Unit-linked Insurance Plan (ULIP). 

ULIP offers dual benefits of insurance and investment in a single plan. ULIPs allow you to diversify your investment, as you can choose from equity funds, debt funds, or a combination of both funds. Equity funds offer substantial ULIP returns, but the risk associated with them is high. Conversely, debt funds are less risky, but the returns are considerably low. If you are looking from a long-term perspective, ULIP offers lucrative returns on investment as compared to other instruments. 

ULIP is a wonderful investment tool if you remain invested for a duration of 10-15 years. If you are investing at an early age, you can give your funds more time to grow. If you are thinking in mind “why should I invest in ULIP“, here are a few advantages of investing in it from an early phase of life. 

  • Helps you earn substantial corpus

If you start investing when you are in your 20s or early 30s, you can build a sizable corpus in the long run through ULIP returns. You can use this corpus to secure your retired life and meet goals like buying a new car or house, funding your child’s education, and sponsoring his or her wedding. 

  • Provides life cover at an early age

Young people avoid buying life insurance and instead spend money on trivial activities. As life is uncertain, it is necessary to invest in life insurance and make sure that your loved ones are financially protected in your absence. Moreover, you can avail of ULIP at a much lower premium during your youth in comparison to when you are old. Additionally, insurers charge lower mortality charges in ULIP from a younger policyholder. These expenses increase if you invest at an older age. 

  • Offers tax benefits

Another reason for the popularity of ULIP is that it provides tax exemptions. The premium that you pay is tax-deductible up to INR 1.5 lakh as per Section 80C of the Income Tax Act, 1961. In addition, the maturity proceeds and the death benefit are tax-free as per Section 10 (10D) of the Act.  So, if you invest in a ULIP at an early age, the amount you save on tax will be quite high over a long tenure. 

When you are young, you have lesser financial responsibilities. Thus, you can save and invest your money in ULIP to secure a better financial future. Many people are skeptical about investing in ULIP because of its charges. However, it is a worthwhile investment, as it offers attractive returns. If you stay invested until maturity and pay all premiums on time, some insurers may reimburse the mortality charges in ULIP throughout the policy tenure. They add this sum to the fund value on maturity. So, plan your ULIP investment and live a financially peaceful life when you retire.