Last Updated on January 21, 2020 by Gopal Gidwani
After the re-introduction of a Unit Linked Insurance Plan (ULIP) in the market, many of you might choose to invest based on your risk appetite. Although a ULIP plan is a market-linked product, it can allow you to diversify your investment portfolio without the fear of market volatility. A ULIP plan is a financial product, which is a combination of investment and insurance.
During your active working years, you can start a ULIP investment at a young age. When you invest in a ULIP plan early, you can build a substantial corpus to live a secure financial period in the future. However, you might hesitate to invest in a ULIP policy at the start of your career since your income might be low initially. The good news is that you can begin by investing a minimal amount regularly to accumulate funds for a brighter future.
Before you purchase a ULIP plan, you should know the minimum amount of money you can invest in a ULIP policy. Therefore, let’s understand the minimum limit of a ULIP policy every month.
Under a ULIP policy, you can start investing with an amount as small as Rs. 1,500 every month. However, you should pay the premiums regularly to reap the benefits of a ULIP policy. The premiums should be paid until the end of the policy term. The flexibility offered by a ULIP policy can make the minimal investment worth all your money.
For instance, let’s assume you have won a cash price of Rs. 1,20,000 in an event at 18 years. After winning a huge amount, you might think of investing it for the growth of your money in the future. Although your parents might have suggested you to invest in traditional tools, you decide to go ahead with a new-age ULIP plan due to its relatively high investment benefits and low ULIP charges.
A ULIP policy is a dual-benefit product. With a ULIP policy, you can not only financially protect your loved ones but also participate in the capital market. Additionally, you can invest in a ULIP policy for the top four reasons mentioned below:
1) You can ensure a disciplined habit of saving
When you start investing a minimal amount at a young age regularly, you can develop a disciplined habit of savings. Moreover, compounding would help you to grow your small sum of money in a substantial corpus in the future.
2) You can avail tax benefits
A ULIP policy can offer dual tax benefits to reduce your tax liability. The premiums and the maturity pay-out can be eligible for tax-exemptions under Section 80C and Section 10(10D) respectively. While you can claim a deduction of up to Rs. 1,50,000 from your taxable income, the maturity pay-out can be tax-free.
3) You can switch between funds
Under a ULIP policy, you can protect your funds from the market fluctuations. When you invest in a ULIP policy, you can opt for the switching feature to safeguard your funds and obtain ULIP returns based on the market performance.
4) You can choose between the different ULIP funds
Typically, a ULIP policy can allow you to select between the following types of funds based on your risk appetite and investment goals:
a) Equity funds
An equity fund is a risky option of investment since the generated returns can depend on the performance of the market.
b) Debt funds
A debt fund is a low-risk investment option, which can provide relatively low returns than equity funds.
As highlighted above, the minimum investment under a ULIP policy can be as low as Rs. 1,500 per month. Irrespective of the amount, the ULIP benefits are relatively high. Before selecting a ULIP policy, you should calculate the premium on a ULIP calculator and compare different investment products. Moreover, choose a credible company to ensure you receive high benefits at a low rate.