There is no specific age to opt for investments. Similar to other types of investment options, such as Mutual Fund (MF), you can buy a Unit Linked Investment Plan (ULIP) at any point of time. However, purchasing a ULIP policy at a young age can be beneficial than buying the policy after growing older.
When you opt for a ULIP policy early, you can reap the benefits of the power of compounding. With compounding, you can generate interest on your returns received from investments when you are young. Therefore, invest in a ULIP policy at a young age since you can make a significant amount of money by the time you grow old. For instance, by investing Rs. 5,000 every month at the age of 30, the chances of accumulating Rs. 75 Lakh for your future can be more. If you want to build a substantial corpus, stay invested until the completion of five years of a ULIP policy.
Apart from the benefits of the power of compounding, you can also make the most of your high-risk appetite at a young age. Many of you might have an aggressive investing habit due to minimal financial responsibilities. When you can afford risks at a young age due to a high-risk tolerance, you can invest in equity funds under a ULIP policy. Although equity funds are linked to the market, you can receive relatively high returns when the market is in good condition, which in turn can help you make more money.
As a young adult, you might have life goals, such as traveling, saving up for a bigger international trip, and so on. If you want to achieve such extravagant dreams, you might require a large corpus to fulfil them. The primary reason why a ULIP policy can be the right choice for you is that it can inculcate a discipline financial habit as well as double your invested capital for you to achieve your long-term goals.
A ULIP plan can offer the following benefits as mentioned below to meet your financial requirements at a young age:
- You can alter your premium payment mode
Premium is paid in return for the life cover. Hence, you should pay it regularly within the selected premium payment frequency. A ULIP policy can allow you to pay your premium annually, half-yearly, monthly, or quarterly.
- You can choose between a variety of funds
A ULIP policy can offer you with equity funds and debt funds. As a policyholder, you can choose between these two types of available ULIP funds based on your risk appetite and investment goals.
- You can opt for fund switches
The switching feature under a ULIP policy can allow you to move your assets from one fund to another based on the market volatility. For instance, choose debt funds when the market is down and equity funds when the market bounces back.
- You can receive tax benefits
After you start earning, you might be unable to escape tax payments. A ULIP policy can provide you with dual-tax benefits, according to Section 80C and Section 10(10D) of the Income Tax Act, 1961. While Section 80C can let you claim a deduction up to Rs. 1,50,000 on your taxable income, death benefits can be tax-free under Section 10(10D).
As highlighted above, every working professional should invest in a ULIP policy. However, before opting for the investment, you should understand what is ULIP policy in detail to make informed decisions in the future. A ULIP investment plan can secure your future as well as let you participate in the capital market at a young age.
