Nobody can say no to an additional income stream. It helps ensure that you are financially secure and there will always be a backup to fall back to in case something goes wrong with your primary job.
At the same time, a lot of people think that an additional income is only possible if they start another part-time or full-time job. While that is one way to add an additional income, there are other easier ways too. One way to do this is through investing. There are multiple options available where you can invest some money to create an additional income source. In today’s article, we will discuss how ULIPs can help with the same.
What is a ULIP policy?
ULIPs or unit-linked insurance plans are life insurance policies that offer an investment element as well. A part of your premium for these policies goes for life cover, while the other part is invested in different securities, according to the portfolio of the fund.
ULIP’s investment part works similarly to that of a mutual fund. Different ULIP plan will have different characteristics for their portfolio, and there will be a fund manager who pools money and manages the fund.
The insurance part of a ULIP plan works similar to any other type of life insurance plan. There will be a sum assured, and in case of an unfortunate event where the family loses the insured, a beneficiary, which is usually a family member, will receive a financial benefit.
ULIPs provide an ideal platform for investors who are looking to add value to the money they pay for life insurance.
How to build additional income sources through ULIPs?
ULIP’s benefits include its investment element. As mentioned above, a portion of your premium is invested on your behalf here. With proper planning and calculation, you can use this to create an alternate income stream for yourself.
ULIPs have a lock-in period of five years, post which, withdrawals from the investment will not hamper your life insurance. The key here is to figure out the amount of income that you will need to calculate the time required to reach the sum, and invest accordingly.
For instance, if you are 30 now and if at 40, you want an income of a particular value, you can use calculators available online to figure out ULIP returns in 10 years and calculate how much you should invest to reach your goal.
Once you reach the goal and your target age, you can start withdrawing a monthly income from your ULIP plan. One important thing to note here is to make sure you factor in inflation as well. Plus, ULIP works better in the long term, thanks to compounding. In the example above, your ULIP returns in 10 years will contain all the previous years’ returns added back to it.
How to start a ULIP plan online?
You can buy ULIP plans in a matter of minutes through insurance companies’ websites or apps. All you need to do is have your details, including address and income proofs and nominee details ready, and you will be able to sign up hassle-free.
The insurance
The investment element that ULIP has doesn’t take anything away from its life cover part. Life insurance is very important to safeguard your family, and a ULIP provides a perfect platform to invest, and at the same time, safeguard your family.
At maturity, if the insured policyholder survives the term, the payout money can add to your income stream as well.
There is no doubt about a ULIP’s benefits, but you should make sure what you choose is the right plan for yourself. Since there is an investment element, there are different portfolio choices you can choose from. Here, you should ideally choose something that is in line with your investment horizon and risk appetite. You can talk to your financial advisor to get help figuring this out as well. So, don’t get stuck on the details, get a ULIP today to make the most of it!
