Got your first paycheck? Well, the excitement must be real. Until the anxiety hits- the rent, EMIs, insurance, and suddenly you’re thinking if you should save or invest? Savings feel slow to you, however, investment is something that feels complex. Struggling with such questions when you’re just starting to earn might feel overwhelming. With a bunch of options available like mutual funds, PPF, and EPF, what is the right choice for you?

Well, as a first-time working professional, both you and your money need to work smart. You can get something that isn’t just insurance or just investment, but a blend of both: ULIP. ULIPs, Unit-Linked Insurance Plans, are financial products that offer several benefits. Continue reading to see what these are, how they work, and whether they make sense to you as first-time working individuals. 

What are ULIPs?

Before we go any further, let’s understand the ULIP meaning. Well, as mentioned, ULIPs are plans that give you dual benefits of life cover as well as investment. Now you may wonder how? Let’s see. 

1. To invest in ULIPs, you need to pay a certain premium. Now, these premium payment modes can be chosen as per your preference and income flow. You may make premium payments on a monthly, yearly, half-yearly, or quarterly basis.
   
2. Now, these premiums are invested in two components. A part of it is directed towards life cover. While the other part is invested in market securities like equity funds, debt funds, and hybrid funds, whatever you choose as per your risk appetite.
   
3. Now, you also choose an investment term, say 5 years, 10 years, or 15 years, during which your investment component grows as per market conditions and performance.
   

Pro tip: You may use a ULIP calculator to see and analyse the potential returns on different investment terms and choose a plan accordingly. 

Is ULIP Worth It for First-Time Working Professionals

When you’ve just started earning, you might think of several things: is investing the right thing to do? Are ULIPs worth it? Well, if you’re still struggling with such questions, consider understanding the pros and cons of a plan. So, here are some benefits of ULIPs, showcasing that they can help you. 

• Combo Product with Investment and Insurance 

One of the prominent benefits of ULIPs is that young professionals need not juggle between two separate financial products. Instead, with ULIPs, you get the benefits of two products in one. It allows you to secure the financial future of your loved ones with the insurance part, while the investment component helps grow your money. 

• Flexible + Disciplined Investing 

With ULIPs, you can invest for the long term, encouraging disciplined investing. ULIPs are designed with a lock-in period of 5 years. Meaning you are not allowed to liquidate your funds during this period. However, in case an individual wishes to surrender their policy during this lock-in period, they might have to pay discontinuation charges as per the policy terms. 

However, with ULIPs discipline, the investment approach does not need to be rigid. You enjoy flexibility in choosing the premium payment term, switching funds, selecting your investment preference and tenure, and much more. 

This means that if you’re just starting, you can take it easy and slow. 

• Suitable For Long-Term Planning 

With ULIPs, you can also fulfil your long-term goals. Consider buying a car in 5 years or funding your child’s education in 10 years or more. You simply need to align your investment tenure and financial goals. 

• Helps You Earn Tax-Saving Benefits 

Once you’ve started earning, you also have to be aware of the taxes and tax-saving benefits. With investment in ULIPs, you may enjoy tax deductions under 80C of the Income Tax Act. The maturity benefits are eligible for tax exemptions under section 10(10D) of the Income Tax Act. 

• Easy Switching of Funds

Imagine you choose a certain fund in your ULIP plan as a first-time working professional. However, soon in life, your career grows, and so do you. Now, are you expected to stick with the same fund type for the whole tenure? Well, no. With ULIPs, you may easily switch funds as you and your financial objectives grow in life. 

Who Else is ULIPs for?

A ULIP offers several benefits to young professionals. However, these plans aren’t just for them. Here is a list of individuals who may consider investing in and benefiting from ULIPs. 

1. Young earners with fixed income
2. Freelancers and entrepreneurs 
3. Individuals looking for tax-savings plans
4. Individuals with clear medium to long-term financial goals, etc. 

Wrapping Up

Investing in ULIPs can help you earn several advantages, like partial withdrawals, tax savings, and much more. However, make sure you do not ignore the risks.  For instance, you have to comply with the lock-in period, there is market volatility related to fund performance, and much more. Make sure you understand your investment preference, risk appetite, and invest accordingly. A ULIP calculator can help you estimate potential returns. You can use this tool to compare different plans and choose the one that best meets your needs. 

Photo: Andrea Piacquadio via Pexels.

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