5 reasons why singles should consider ULIP plans

2024-08-02

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If you thought that financial management, insurance and long-term goals for wealth creation were to be started only after marriage, then nothing can be farther from the truth. While it cannot be denied that marriage brings manifold responsibilities, like that of your spouse and children, there are a slew of reasons in favour of considering Unit Linked Insurance Plans (ULIPs), while still being single. A ULIP will not only provide you with the benefits of life insurance, but also allow a part of your funds to be invested in debt or equity, in sync with your individual financial goals.

Understanding ULIPs:

A Unit Linked Insurance Plan is a financial scheme, providing dual benefits of both insurance and investment. While a part of your funds is used to provide you with life cover, the rest is invested in debt instruments, equity instruments, or a mix of both. The plan not only provides your family with financial stability in the case of any unfortunate eventuality, but also provides you with high returns from the market.
You don’t require expertise in the financial market as ULIP are managed by professional fund managers. They invest your funds in a wide variety of market instruments ensuring high returns.
ULIPs also have the key feature of fund switching, where you can switch the investments from debt to equity or vice versa on the basis of the performance of the funds. Fund switching also depends on your risk appetite, i.e. the amount of risk that you are willing to take in the present market scenario.
According to the Insurance Regulatory and Development Authority of India (IRDAI), ULIPs have a fixed lock-in period of 5 years. A fixed lock-in period ensures investor’s discipline, besides allowing the benefit of capital appreciation.

Here is a list of five reasons why you should invest in ULIPs, while still being single

1. Repayment of financial liabilities: It is possible that you or your parents would have taken educational loans, along with other borrowings to meet the cost of your education. Once you start earning, you can pay off your own student loans or effectively contribute towards the repayment of those your parents have taken. A ULIP can allow you to meet this financial liability with ease. On the one hand, it ensures you build a significant financial corpus to help pay off these loans in the future. On the other hand, it ensures that the repayment of these loans does not become a financial burden on your parents, by providing them with a death benefit in the event of your unfortunate demise.

2. Provides tax benefits: If you have started earning, then you must always select an investment avenue, which provides tax benefits. It is precisely here that a ULIP becomes unbeatable. The premiums paid for ULIPs are exempt from taxes under Section 80C of the Income Tax Act. Further, the returns which you receive are also tax-free under Section 10D of the act. ULIPs are also one of the market instruments to be exempted from the LTCG (Long Term Capital Gains) tax. So, choose Unit Linked Insurance Plans and make the most of your investment.

3. Finance long-term goals: If you are a single person with a job, then you must plan for future expenses. You should plan for your marriage expenses, the cost of your child’s education, and even zero in on retirement planning. Instruments like ULIPs can come in particularly handy for such purposes. A key feature of ULIPs is that you stand to benefit from the compounding of your money, that is, your returns are reinvested into the fund to generate even higher output. You can choose either to exit at the end of the minimum lock-in period, or reinvest your money for another term. The returns from ULIPs, over the long term, will ensure that you will be able to meet all future expenses with ease.

4. The flexibility of fund switching:

As a single person, you should choose ULIP because of the considerable flexibility offered by them. If you are unsatisfied with your returns, you can switch your funds to equity, debt or balanced funds. Typically, you are allowed four switches in a given financial year.
Moreover, being in the earlier stages of your life, your priorities are likely to be constantly evolving and growing. The flexibility to switch your funds and redirect your premiums gives you the chance to align your ULIP investment with your changing financial goals.

5. Higher returns and fewer charges: As compared to other investment avenues, like PPF, NPS, post office time deposits, tax-saving fixed deposits, and NSC, ULIPs offer higher returns, which can be up to 12%. You also have to pay lesser charges for premium allocation, fund management and surrender, as per revised IRDAI guidelines.

Conclusion: Thus, ULIP can be ideal investment avenues for single people. Before investing in ULIPs do remember to compare various schemes, and select only the best. You can consider the Invest4G plan from Canara HSB. It provides the option of a return of mortality charge along with other benefits, like loyalty additions and wealth boosters.

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