Customising a ULIP Plan for Your Wedding Expenses: A Youth Perspective
Creating a viable Plan For Your Wedding Expenses is one of the most important steps to make your big day unforgettable. Whether you’re dreaming of a one-day celebration or a week-long extravaganza, setting a wedding budget early on ensures you can create a magical day filled with cherished memories. Let’s dive into how to make every detail perfect while staying on track!
For many young couples today, taking charge of wedding planning comes naturally. From finding the perfect venue to curating memorable guest experiences, the wedding becomes an exciting process. But let’s not forget excitement often comes with expenses!
Dream weddings don’t have to mean financial stress, especially when the planning starts early. By beginning your financial preparations years in advance, you can create a budget that allows you to have the wedding you’ve always wanted. And here’s where a Unit Linked Insurance Plan (ULIP) comes in the picture. It’s not just a life insurance plan but also an investment tool that can help you grow your savings over time.
When planned correctly, a ULIP can be one way of financing your wedding. Let’s discover how!
Contents
What are ULIPs?
A Unit-Linked Insurance Plan (ULIP) is a life insurance plan that also offers an element of investment. Yes, you read that right! A part of the premium goes towards life insurance coverage, and the remaining goes to investment. Depending on the amount of risk, you may choose to invest your money in equity, debt, or mixed securities. Ulips come with a 5-year lock-in period, after which you may withdraw funds as and when needed.
The tenure of ULIPs can range from 5 to 15 years or even more. If the insured passes away during the policy tenure, the pre-decided death benefit is paid to the beneficiary. In case the insured outlives the policy tenure, they receive the fund value of the investment, which includes the total invested amount and the interest earned on it.
How much amount should you withdraw?
A wedding includes a range of expenses. If you are planning to invest in a ULIP to cover wedding expenses, you need to consider multiple factors. These may include:
- Estimate of wedding expenses
You must pen down the expected wedding expenses. Calculate these to have an idea of the lump-sum amount required. Do not forget to keep some extra funds, as you will need some cushion for inflation too!
- Starting a ULIP
Now that you are aware of the expenses, you can decide the amount you want to invest in ULIPs. Bear in mind that the amount you invest cannot be withdrawn for 5 years. You may expect a lump-sum return earned for the number of years you want to stay invested.
- ULIP calculator
To make the task easier and quicker, you may calculate the expected amount using a ULIP calculator. It is a digital tool that gives you a quick insight into the amount you will receive upon maturity. You can adjust the rate of return, investment tenure, and type of investment instruments. The ULIP calculator will show you all the results.
- Emergency fund
Understanding the lock-in period clause is crucial when planning a ULIP, bearing in mind the 5-year lock-in period. Make sure to have an emergency fund so you don’t end up breaking your policy or withdrawing the amount prematurely.
How do ULIPs work?
ULIPs include both life insurance cover and investment. Check out how a ULIP works
- A part of the premium paid for ULIP goes into investment (equity, debt, mixed), and the other part is reserved to provide life insurance cover
- Since the plan has a lock-in period, you cannot withdraw any amount during the first 5 years.
Remember: Even if you choose to terminate the policy, withdrawal is not permitted during the lock-in period - Depending on the life insurance company you choose, there may or may not be withdrawal charges.
- You may also have a limit on the number of withdrawals allowed. Usually, a maximum of 25% of the fund value can be partially withdrawn. It’s best you check the same with your insurance provider
- The death benefit remains tax-free under Section 10(10D) of the Income Tax Act of 1961. However, the interest earned on the investment is taxable.
Can I partially withdraw from ULIPs?
Yes, you can opt to partially withdraw from your ULIP investments. However, most financial advisors advise against it. ULIPs invest in securities that need time to grow. Disturbing the amount in between may not give you the best returns upon maturity. However, in case of an emergency, you can withdraw a limited amount after the lock-in period of 5 years.
After the lock-in period ends, the policyholder may withdraw amounts from ULIPs. Multiple withdrawals may be permitted, depending on the insurance provider. However, it may come with premature withdrawal charges after a certain attempt. You must also note that generally, a maximum of 25% of fund value can be withdrawn before the maturity of the plan. So, it is crucial that you have an emergency fund to avoid premature withdrawal from ULIPs.
Conclusion
With a little planning and awareness, ULIPs can give you the flexibility to decide the financial goals of your life with ease. While planning your wedding, make sure to use a ULIP calculator that can help you decide the right amount! Apart from weddings, you can also plan various other essential expenses in life with ULIPs. So, start planning today to reap returns when the time comes!
