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Millennials’ Guide to ULIP Investment in India 

In Finance
May 10, 2021
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Most people tend to categorize millennials as individuals who are experimental, risk-favoring, and simply unconventional. Naturally, their money habits are also different from the previous generation. However, it does not mean that millennials do not consider it crucial to invest their money.  

When it comes to investment choices, millennials need products like ULIP that suit such preferences. The traditional products used for investment purposes may not satisfy the evolving demands of your lifestyle. 

If you are a millennial, it is likely that you wish to put your money in uncomplicated but innovative investment options. Fortunately, Unit Linked Insurance Plans (ULIP) are structured to provide such features. They are designed to suit different degrees of risk-appetites and offer returns accordingly. 

You can choose the best ULIP plans depending on your financial profile. Buying a ULIP enables you to customize your investment to match your requirements. As a millennial, you might worry about achieving the key financial goals, such as buying a house, growing your savings, retirement planning, etc. 

ULIP is an insurance product that can enable you to fulfil such objectives. Let’s understand how ULIP works in detail. 

What is ULIP?

The average age of India will be 29 years by the year 2025. With the substantial population being young, it is vital to address their investment needs. ULIP is an investment tool that is distinctive because of the combination of benefits. With ULIP, you can enjoy life coverage as well as returns from investment in mutual funds. 

When you buy ULIP, you are required to pay a premium to keep the policy active. A portion of this premium amount goes into securing life coverage, and the remaining is invested. The investment amount in ULIP goes into funds of your selection.

You can analyze the risk factor against your financial goals and capabilities to invest appropriately. Choosing from some of the best ULIP plans can be difficult, especially if you are a beginner investor. 

Hence, it can help to familiarize yourself with the features and functions of ULIP to make a sound decision. Here are some key points to know about ULIP:

 

  • The dual benefit of ULIP offers an opportunity to grow your savings and secure financial protection under one plan. 

 

 

  • ULIP also allows you to diversify the investment portfolio with increased flexibility and customization options. For instance, you can switch between funds in a ULIP if you feel the need for it. 

 

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  • For millennials, a long-term investment product like ULIP helps in instilling discipline for investment regularly.

 

 

  • Different types of investments in a ULIP cover the needs of people with varying financial backgrounds and risk-appetites. 

 

 

  • With a ULIP, you can build a sizeable corpus over time to achieve significant life goals. 

 

 

  • Since ULIP is a market-linked product, you must be aware of the implications of market fluctuations on the fund’s performance.

 

 

  • Certain charges for managing ULIP are deducted from the premium amount, which depends on the insurer’s terms for the ULIP. The charges may include fund management charges, administrative charges, surrender charges, partial withdrawal charges, mortality charges, etc. 

 

 

  • Investments in ULIP are also eligible for tax deduction under the Income Tax Act, 1961. You can reduce the burden on your income and gain life cover along with investment benefits by choosing from the best ULIP plans. 

 

How To Buy ULIP Plans?

Before buying a ULIP, it is crucial to evaluate your financial situation carefully. A long-term investment impacts your life considerably in the present and future. Hence, make sure you understand the ULIP features and benefits to avoid any misunderstandings later. 

Furthermore, here are some of the things to consider when investing in ULIP:

 

  • Prioritize Your Financial Goals

 

When going for any kind of investment, it is vital to know the purpose of it. If you have a clear picture of the expectations in mind, it is easier to manage the investment. ULIP can be an excellent addition to your investment portfolio if you know how to optimize the benefits. 

 

  • Calculate the Life Cover and Investment Amount

 

Next, calculating the amount for coverage and investment under ULIP is essential. You can determine the adequate coverage for life by looking at the current life stage, financial obligations, nature of income source, etc. 

For determining the investment amount, you should look at the future life goals that may include the birth of a child, their higher education, buying a car or home, and other such expenses. 

 

  • Think Long-Term

 

One thing that many young people might not consider when buying ULIP is the changes in their financial needs in the coming years. As important as it is to consider your short term plans, it is unfavorable to overlook how ULIP investment impacts your future.

At different stages in life, the financial responsibilities are different. So, a ULIP investment should be planned by taking specific events and goals under consideration. 

It is relatively convenient to buy ULIP in today’s time, as most things are available online. You can review your requirements and find the best ULIP plans that match them conveniently. Remember that early investment can yield better results if you plan right for it.