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ULIP Benefits You Can Avail from Early Investing

ULIPs are an excellent investment opportunity for young individuals, offering them the chance to accumulate wealth and develop disciplined saving habits. Continue reading to explore further details.

  • 2,679 Views | Updated on: Jan 04, 2024

Investing wisely is the key to securing your financial future. One such investment avenue that offers both wealth creation and insurance benefits is the Unit Linked Insurance Plan (ULIP). ULIPs have gained popularity over the years as a comprehensive financial tool, primarily due to their dual advantage of providing insurance coverage and investment opportunities.

Key takeaways

  • ULIP gives time to build a corpus, save taxes, and help people get disciplined with the art of saving.
  • You can use the ULIP calculator to check the difference in the funds accumulated when you start investing in your 20s versus in your 40s.
  • Most ULIP policies allow partial withdrawal.
  • ULIPs are a great way to learn to invest in a disciplined manner. ULIP policies have a minimum lock-in period of 5 years.

ULIPs also offer various benefits and options for the policyholder to invest in multiple market-linked funds as per their risk appetite. In this article, we will discuss how ULIP is an excellent tool for early investing, the benefits of early investment, and how the benefits of early investment in ULIP can help you in long-term goals.

How ULIP is a Great Tool for Early Investing?

ULIPs are a great investment option for youngsters. It gives them time to build a corpus, save taxes, and help them get disciplined with the art of saving. Moreover, as the interest compounds, the sooner an investment is started, the higher the chances of yielding more interest. In the case of ULIP, the fund’s growth is often faster since it is a market-linked investment tool.

ULIP Benefits for Early Investment

Among the various investment options available, Unit Linked Insurance Plans (ULIPs) have gained popularity for their unique blend of insurance and investment features. Let us have a look at the top benefits of early investment in ULIP:

Accumulation of a Bigger Corpus at Your Disposal

As you start investing early in life, you ensure that you are adding more years to your investment journey. These early years that you have added to your investment journey might not look fruitful at the beginning, but in a later stage of life, this will help you build a bigger corpus. So, if a person starts investing in their 20s, he can save way more till their 60s compared to those who start saving in their 40s.

You can use the ULIP calculator to check the difference in the funds accumulated when you start investing in your 20s versus in your 40s. It is apparent that even when you invest a sum of ₹5000 per month in a ULIP policy offering a return of 8%, when you start investing late and invest only for 15 years, you only accumulate around ₹17 lakhs.

Whereas a youngster who started investing in their mid-20s (say since they were 25 years old) and kept investing regularly for 30 years accumulated a sum of ₹75 lakhs at an interest rate of 8%. Thus, by the time he is 55 years old, he will have a massive corpus at his disposal compared to the person who started investing late.

Security of Life Insurance Since The Beginning

When you opt for ULIP at an early age, you confirm that your life is insured and that your family will remain financially stable even if something unfortunate happens to you. Also, when you take life insurance at an early age, the premium amount is less, and you will get to avail more significant benefits.

Tax Saving

ULIPs are a great tax savings tool. They offer an E-E-E (Exempt Exempt Exempt) model of tax savings where a policyholder is exempted from tax on premiums paid, proceeds, and maturity subject to Section 80C and Section 10 (10D) of the Income Tax Act.

5 Reasons You Should Invest in ULIPs

Unit Linked Insurance Plans (ULIPs) offer policyholders the opportunity to not only secure their financial future but also grow their wealth over time. Here are five compelling reasons why you should consider investing in ULIPs.

Dual Benefit of Insurance and Investment

ULIPs are unique as they offer both insurance coverage and investment opportunities in a single product. A portion of your premium goes towards providing life insurance coverage, ensuring that your family is financially protected in case of an unfortunate event. Simultaneously, the remaining portion is invested in various funds of your choice, allowing you to grow your wealth over time. This dual benefit makes ULIPs an attractive choice for those looking for financial security and growth potential.

Flexibility in Fund Choices

ULIPs provide you with the flexibility to choose from a range of investment funds based on your risk appetite and financial goals. These funds typically include equity funds, debt funds, and hybrid funds, allowing you to diversify your investment portfolio. Whether you are a conservative investor or willing to take higher risks for potentially greater returns, ULIPs cater to a wide range of investment preferences.

Transparency and Control

One of the key advantages of ULIPs is the transparency and control they offer to policyholders. You can easily track the performance of your investments and make fund switches or portfolio reallocations as per your changing financial goals and market conditions. This level of control allows you to adapt your investment strategy over time, ensuring that your money is working optimally for you.

Long-Term Wealth Accumulation

ULIPs are ideally suited for long-term financial goals such as retirement planning or funding your child’s education. By staying invested for an extended period, you can benefit from the power of compounding and potentially achieve significant wealth accumulation. Furthermore, since ULIPs have a lock-in period, they encourage disciplined investing, preventing premature withdrawals that can hinder your financial growth.

Parting Words

Early investment in Unit Linked Insurance Plans (ULIPs) offers a multitude of benefits that can significantly impact your financial well-being. From longer investment horizons and lower premiums to tax benefits and the power of compounding, ULIPs provide a unique opportunity to secure your financial future while simultaneously building wealth.

By starting your ULIP investment journey early, you can harness these advantages and put yourself on a path towards achieving your financial goals with greater ease and confidence. Remember that it is crucial to assess your risk tolerance, choose the right fund options, and regularly review your ULIP portfolio to ensure it aligns with your evolving financial objectives. With the right approach, ULIPs can be a powerful tool for long-term financial success.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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