How Can Your ULIP Plans keep up with Your Changing Life Stages?
A Unit Linked Insurance Plan (ULIP) is a versatile financial product that can benefit investors across different age groups. It combines the benefits of insurance and investments under one policy. The insurance component gives you a life cover, which can secure the future of your dependents financially.
The investment component allows you to invest in different market-linked ULIP funds, like debt funds, equity funds or even a mix of the two. As a policyholder, you will have to pay premiums to the insurance provider. These premiums are eligible for tax benefits u/s 80C of the Income Tax Act, 1961 subject to provisions stated in the Act.
Now, ULIPs come with many useful features that make them suitable for different life stages, right from the time you start your career till the time you retire.
ULIP Features that make it Suitable for Different Life Stages
ULIPs have many features that set them apart from other types of insurance plans. Check out some of these features below.
● ULIP lock-in period
ULIPs have a lock-in period of 5 years. During this time, you cannot withdraw your investments. Even if you surrender your policy, your funds will be paid out only at the end of the 5-year tenure.
● ULIP fund switching
You can switch the funds you invest in under your ULIP insurance plan for free, or up to a specific number of times each policy year without any charges. After that, you will be charged a nominal amount of fund switching charges for the same. All of the above depends on the product you have opted for and its underlying conditions.
● ULIP partial withdrawal
ULIPs also allow you to partially withdraw funds from your investment after the lock-in period, to meet emergency cash flow needs.
How your ULIP Investment Keeps up with Different Life Stages
Knowing the features outlined above, let us take a look at how ULIP insurance policies can keep pace with the changing needs of the different stages in your life.
● In your 20s:
At this life stage, you will just be getting started with your career. You may be single, or even if you’re married, you may not have too many financial responsibilities to take care of. So, you can use the investment component of your ULIP to invest in market-linked equity funds. They carry a considerable level of risk, but they also have the potential to make your investment corpus grow.
● In your 30s:
In this stage of life, you may have a stable source of income since you would be nearly well-settled in your career. But along with this, you may also find yourself facing more responsibilities like taking care of your family and repaying your home loans. You will also have to start planning for your children’s future.
The lock-in period in a ULIP plan ensures that remain invested over the period. This allows adequate opportunity for your corpus to grow, so you can meet these life goals. You may continue to remain invested in equity funds during this period also as per your risk appetite.
● In your 40s:
In your 40s, your retirement phase is closer than it was in your 30s. If you have the risk capacity to tolerate it, you may still have a sizable portion of your investments in equity funds if need be. Alternatively, you can use the fund switch feature in ULIPs to move some of your ULIP investment to safer ULIP debt funds.
All this time, your ULIP’s insurance component will also be in place, keeping your loved ones financially safe in case something untoward happens to you.
● In your 50s:
As you get closer to retirement, you may once again consider using the fund switch feature to move your investment to ULIP debt funds. This way, you can protect the ULIP returns you earned over the years and use the corpus you’ve built to meet any major life goals that may coincide with the policy maturity. This could be your children’s college education, their wedding, or even your retirement.
Why you may consider Investing Early in a ULIP Plan
To truly enjoy the benefits of ULIPs across different life stages, you not only need to remain invested over the tenure of the plan, but you also need to consider investing in your ULIP early. Here are some other advantages of investing in your ULIP early on.
● Lower mortality charges
If you buy a ULIP when you are younger, your mortality charge tend to be lower, provided that you are not suffering from any lifestyle diseases. This is because insurance providers view you as a low-risk applicant if you are young and healthy.
● Power of compounding
If you buy your ULIP insurance early in life, you can remain invested for a longer period. And the longer you remain invested, the more the power of compounding works on your funds to help them grow.
● Market-linked investments
When you are younger, you also have a higher risk appetite. So, you can take advantage of the market-linked equity funds in a ULIP plan and benefit from the potential to earn higher market-linked returns.
● Protection for your loved ones
Lastly, the earlier you buy your ULIP insurance cover, the sooner your loved ones will be financially protected in case of any untoward incident. So, consider getting your ULIP early in life.
This sums up the key details of how a Unit Linked Insurance Plan can adapt and be useful to the different stages of life. Keep these useful features in mind and make the most of these benefits when you buy your ULIP.
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