At the present where the use of investments and side businesses are common, people require easily accessible solutions when dealing with their financial lives. When dealing with such an economic reality as millennials, there stands out one of the wise financial decisions that is – Unit-Linked Insurance Plans (ULIP).
What are ULIPs?
Underwritten as insurance products, these products go by the acronym ULIP, which stands for Unit-linked Insurance Plans. Compared to ordinary life insurance products, ULIPs provide policy owners with an opportunity to invest a portion of their premiums to different funds: equity, debt, or liquid. For this reason and the other mentioned above, millennials will find ULIPs appealing for meeting their financial needs and building wealth for the future.
Let say some millennial walks into a financial planner with an aim to invest and buy a ULIP with a amount of INR 2 crore with a maturity period of 20 years. When they die within this period, their next of kin benefits from the entire value of the sum assured.
The Benefits of ULIPs
The flexibility that originates from the middle of insurance and investment in ULIP’s is multiplied with added benefits are making it a more attractive proposition for those who aim to secure their loved one and amass wealth together.
Dual Protection
In this respect, the ULIPs have what can be regarded as a main advantage: the life coverage capability. Another similar element to the conventional life insurance policies in the case that the policyholder dies prematurely, his/her nominees are noticed by a death benefit. It affords money security and comfort that the beloved ones are shielded.
Investment Flexibility
ULIPs give investors wings of flexibility when it comes to investing in the instrument available in the market today. Investment arises where the policyholder has some excess which they invest in various related market products with risks. Depending on whether an investor wants higher returns with the money invested like in equity funds or safer investment plans like debt funds, the ULIPs plan offer flexibility by letting people control the type of portfolio they want to build.
Risk Management
For those who are on the conservative side, they have an avenue for investing in ULIPs. Thus, the strategy of using a portion of the received premiums investing it to safe haven assets and the rest to market related tools would be helpful at the policyholders’ levels.
Liquidity
However, unlike many of the conventional insurance products, ULIPs have the element of liquidity. Policyholders can surrender policy after the lock in period in case of emergencies, but only partially hence always having a source of funds instead of borrowing.
Maturity Benefits
After the policy term, in addition to the surrender value, the policyholder is also paid a maturity sum, which is in some way different from the investment profits. This feature makes ULIPs a perfect saving tool which can give a lump sum amount to be utilised for various major events or for investment.
Premium Customization
ULIPs comprise premium calculators thatôi prospective policyholders are allowed to use and come up with a suitable premium rate. People who wish to invest in Mutual bonds can do so by adjusting features like the tenure and investment preferences in order to fit their budget.
Tax Benefits
ULIPs also have many tax benefits to them if one wants to invest in it so as to be shielded from risks. According to the Section 10 (10D) if the premium is paid less than 10% of the sum assured and it also paid up to 150000/- then its exempted from tax. Moreover, the benefits paid to the nominee and the maturity amount are free from tax, which made ULIPs financially plausible.
Learning Opportunity
Also for the young or new investors particularly the millennials, ULIPs are great learning tools. Conversely, they can get an understanding of market trends and the necessary investments for their own financial security at the same time.
ULIPs: A Smart Investment for Millennials
In view of the changes that have taken place in the world, ULIPs remain the best option for millennials who want to plan for their future. ULIPs are not only economical investments but have a wealth creation and risk diversification model embedded in them.
Financial Security
They serve as insurance protection to clients and their dependants at large especially due to increased risks in the current world. It pays for dependents upon the death of the policy holder and also provides for accumulation of funds for investment.
Growth Potential
Due to the several operational ULIPs that afford one to invest in sundry market related facilities, they portray a powerful growth aspect. The important point to note, however, is that, by selecting the right combination of securities, policyholders can get the best of the total return in the long run.
Adaptability
The given ULIPs feature the flexibility of the financial product that can be adjusted depending on the situations occurred. Regardless of whether one wants to put more money into the market during a bull run or avoid risky investments in bear market, he can do so with ULIP.
Long-term Vision
ULIPs should plan and invest for the long term. These have an average lock-in period of five years to encourage people into saving and investment which are important aspects of a healthy financial status.
Comprehensive Planning
In the end, ULIPs are a microcosm of people’s financial planning requirements, all rolled into one package. Insurance and investments are combined to offer people protection of the present and planning for the future.
Conclusion
Every new financial year steps in a new reality and thus ULIPs as an investment product become a tool that will help smart millennials. These are products that interrelate life insurance with potential market-related investment, thereby providing clients with all round solution of securing their future financially. Being tax-saving, providing easy investment options, & getting twin cover make it perfect for those wishing to survive in the modern world of finance.
On realizing these benefits of ULIPs, a generation of millennials can steer their own financial future, safeguard their family, and instill worthy future.
FAQs
1. What is a ULIP?
A Unit-Linked Insurance Plan (ULIP) is an insurance product that has elements of Investment funds in the market directly.
2. How does a ULIP work?
This policy agreement offers life insurance coverage with a part of the paid premium as well as the investment of the rest of the amount in the various funds as selected by the holder of the policy.
3. Understanding the tax treatment of ULIPs can be more comprehensible if one asks itself: What are the tax advantages of ULIPs?
ULIPs get tax benefits in terms of Section 10 (10D) for the death benefits and maturity amount offered to the investor provided the said conditions to the premium paid has been fulfilled.
4. how much will I be allowed to withdraw from my ULIP?
Yes you can avail partial withdrawal from your ULIP after lock-in period for any exigencies.
5. Should every investor consider using ULIPs?
In its operation, ULIPs can allow for all forms of risks and therefore can suit conservative as well as aggressive investors. One is advised to check their financial objectives and tolerance to risk when investing.
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