The sooner one begins to invest, the better it is. The returns on any funds highly depend on the extent of the duration of the investment. That is why experts suggest that one should begin investing as soon as one is in their 20s or early 30s. Recently, the number of bachelors and young people investing in the market has also increased. This has also helped break the perception that market-linked investment is something only householders do. However, one question that arises here is, which kind of financial instrument should a bachelor invest in? The best option would be a ULIP. A ULIP policy merges life insurance and investment under one product. We list down 4 reasons why a ULIP policy is a suitable investment option for a bachelor.
What is a ULIP policy?
A ULIP policy is a financial product that offers the policyholder life insurance coverage and an opportunity to earn market-linked returns. As with other policies, you pay a premium for your ULIP policy. Instead of allocating the entire premium for life insurance coverage, the insurer uses a major chunk of that premium to invest in the asset classes of your choice. You can invest in debt funds, equity funds, or a mix of both in varying percentages.
How your funds perform in the market determines the gains you will receive in due time.
Why bachelors should invest in ULIPs
- Life insurance and investment under one roof
Many bachelors may find investing in the market an interesting prospect. However, buying a life insurance policy seems like a distant step to them. They may think that because they are young and healthy, there is no need for life insurance. The truth is that there is no better time to buy a life cover than in your 20s and early 30s when you are still a bachelor.
Since you have no dependents, you have a higher amount of savings which you can channel towards your ULIP plan. Young people also incur lower premiums, so that is a plus as well. A ULIP is the best option in this scenario, as it removes the hassle of looking for a separate life insurance product. Your life insurance and investment needs are met under one roof.
- Large corpus to meet future financial needs and liabilities
You may have plans to marry in the near future. Once married, you would want to create the best possible life for your new family members. To create that life, financial stability is of the utmost importance. The different types of ULIP policies can help you create that life. If you start a ULIP plan, let’s say, 3-5 years before your wedding, by the time a few years have passed, you can enjoy the returns of your ULIP plan.
The returns from your ULIP plan can help in fulfilling your financial objectives, such as buying a car, paying the down payment for a house loan, children’s education fees, and so on.
- Greater tax savings
If you have started earning recently, then tax-saving could be and should be a big aspect of your financial planning. By saving on taxes now, you can divert that money towards other important goals for your future. A ULIP policy is a great way to save taxes. As per Section 80C of the Income Tax Act, 1961, the money invested in a ULIP can help in claiming tax deductions up to a maximum of Rs 1.5 lakhs. What’s more, the returns on your ULIP policy are tax-exempted as well.
- Suitable for all ages and risk profiles
As a bachelor, you may have a higher risk appetite since the number of people depending on you is quite a few or nil. So, you may want to invest primarily in equity markets where the risks are high, but so are the returns. However, as time passes and you become a part of a family, your risk-taking capacity may also reduce. You may want a more stable investment option. Instead of withdrawing from equity and buying a new debt instrument then, you can simply opt for a ULIP now. ULIPs allow the investor to shift their funds from one asset class to another as per their needs, as many times as they want.
Thus, one ULIP plan can serve as the ultimate product for your current life stage as well as the stages to come.
Even though you may have a good idea of what a ULIP policy is and its various aspects, we recommend you consult a financial expert before going ahead. Ensure to read the policy wordings carefully before investing.