Planning for a better financial future should be done from an early age. Today, millennials spend a lot of money on travel, clothes, and other lifestyle-related aspirations. Their savings are as good as nil. If you are one of them, it is time that you start controlling your spending habits and make efforts to save enough for your monetary well-being during a later stage of life.
You must start saving for your long-term aspirations, such as your retirement and children’s education, as you need to plan your finances carefully to achieve these goals. Besides this, it is necessary to plan for your short-term life goals like buying a new car, going on an international vacation, and meeting your wedding and honeymoon expenses. For this, it is advisable that you save and invest a part of your income in financial instruments that can help you grow your funds. You can invest your hard-earned money in Unit-linked Insurance Plans (ULIPs), as they are among the most popular wealth generation tools available in the market. Although they are ideal for the long term, ULIPs can also help you to accomplish the short-term objectives of life.
One of the core ULIP benefits is that it offers a combination of life insurance and investment under a single plan, making it a noteworthy financial product. Moreover, it provides higher returns as compared to many other investment instruments like bank fixed deposits and Public Provident Fund (PPF). You can invest your hard-earned money in an equity fund, a debt fund, or a combination of both the funds. As ULIP has a mandatory lock-in period of five years, it allows your funds to grow with time.
Besides this, here are a few more ULIP benefits:
- It helps you in inculcating a habit of saving money. As ULIP has a five-year lock-in tenure, you will automatically start saving and become a disciplined investor
- It provides you with the flexibility of switching funds. So, you can have better control over your investments and earn lucrative returns over time. The performance of equity investments is entirely dependent on market conditions. For instance, you can move your investments from an equity to a debt fund when the market is going through a turbulent time. Here, you are safeguarding your investment, as a debt fund is less risky in comparison to an equity fund. Similarly, when the market is doing well, you can transfer your money from a debt fund to an equity fund. This way, you can maximize the returns on your investment.
- It is an investor-friendly avenue; the Insurance Regulatory and Development Authority of India (IRDAI) has significantly decreased the ULIP charges. IRDAI has reduced expenses like administration charge, premium allocation charge, and fund management charge
- It offers tax benefits. You can claim a maximum deduction of INR 1.5 lakh per year on the premium paid towards your ULIP according to Section 80C of the Income Tax Act, 1961. Additionally, the death and maturity benefits are tax-exempt under Section 10 (10D) of the Act
- It can help you grow your wealth exponentially, as you reap the benefits of the power of compounding
Now when you know “why should I invest in ULIP now”, it is recommended to start planning for a brighter economic future. With the IRDAI reducing the ULIP charges, you can invest in it at a lower cost. Search for an ideal ULIP based on your risk-taking capacity to help you in meeting your short-term and long-term financial goals.