A Detailed Guide to ULIP for Young Professionals in India

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Have you been looking for financial instruments that can secure your family while providing opportunities to invest for market-linked returns? If yes, then the ULIP plan is certainly an ideal product. In addition, it is a valuable product for young professionals considering its flexibility and long-term benefits. Here is a detail to help you understand ULIP insurance, its features, and its benefits.

What is a ULIP Policy?

Unit Linked Insurance Plan(ULIP) is a comprehensive life insurance policy that provides a life cover and market-linked returns on maturity. The life cover will offer your family the lump sum death benefit in your unexpected demise. And the maturity benefit of the market-linked returns will be based on your risk appetite.

Features of the Unit Linked Policy

The ULIP insurance plan provides a range of valuable features to help individuals benefit from varied, flexible options.

  • Life cover with add-on riders – The ULIP plan primarily provides a life cover to help your family reduce the financial burden in your absence. You can also extend the benefits of the plan by opting for additional riders to ensure additional financial requirements in specific scenarios such as when you get affected due to a critical illness, terminal illness, etc.,
  • Market-linked returns – When you have a large family with increasing commitments, investing in financial instruments may not be a feasible and affordable option. However, with the ULIP scheme, you can ascertain market-linked returns with life cover to secure your family for accomplishing important money goals.

The market-linked returns are based on your risk appetite. For example, there are equity funds for high-risk investors, debt funds for low-risk investors, and balanced funds for medium-risk investors. As a young professional, you can invest in equity funds for maximum returns in the long term.

  • Flexibility – The unit-linked policy also helps you switch between the fund options based on the prevailing market conditions. For instance, if you have invested in the equity fund and want to switch to a debt fund considering unfavourable political scenarios, you can always switch to do the same cost-effectively.

Insurers offer a certain number of free switches during the policy term. You can still switch between the fund options on the expiry of free switches at an extremely low cost. When you purchase the online ULIP scheme, such as the Tata AIA ULIP policy, you can purchase the fund, switch between the funds and track your policy return completely online in the comfort of being at your place.

  • Lock-in period – The unit-linked insurance offers a lock-in period of 5 years, after which partial withdrawal becomes available.
  • ULIP charges – The ULIP plan has certain specific charges owing to the investment managed by the insurers. Some of the prominent charges include fund management, mortality, policy administration, partial withdrawal charges, etc.,

Benefits of ULIP Plan

Young professionals can opt to invest in the ULIP life insurance plan considering the following benefits:

  • Secure returns – While market-linked returns always have a risk attached to their applicability, ULIP insurance is comparatively secure considering its type of investment and switching options.
  • Long-term returns – As the ULIP scheme has a lock-in period of five years, it encourages you to stay invested in the long term, develop the discipline to invest regularly, and earn maximum returns.
  • Tax benefits – The ULIP life insurance plan also qualifies for a tax deduction and exemption benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961, subject to certain terms and conditions.

Conclusion

Young professionals can consider investing in the ULIP plan considering its features such as providing the necessary life cover, market-linked returns based on risk appetite, and various other flexible features to secure the returns. You can invest in the long term and receive the returns for accomplishing various planned money goals while saving on tax. Stay invested, keep monitoring the financial market and make the necessary modifications to ensure maximum returns.