Working from your bean bag, in your pyjamas, getting to choose your boss, your clients, and even your income. That’s what a freelancer’s life looks like. It comes with a whole lot of freedom. However, this freedom and flexibility often come with one disadvantage – irregular income. One month, you’re fully booked by several clients, making thousands and thousands. Next month, you’re just sitting idle. This is one of the reasons why financial planning is important for freelancers.
ULIPs, or Unit-Linked Insurance Plans, can be a smart decision. They allow you to invest and insure. Think of it as a two-in-one solution. Are you curious to know more about ULIPs and how they may benefit freelancers? Well, read on to learn more about ULIPs, including ULIP’s meaning, how they work, their benefits, and whether they are worth the investment.
What are ULIPs?
Before proceeding, let’s review the basics. What are ULIPs? Well, when put simply, ULIPs can be understood as a combo of financial solutions that bring in the benefits of two products: investment and insurance.
Now, how do they work? Well, to invest in ULIPs, you need to pay a premium. This can be done on a monthly, quarterly, or yearly basis. Once your premiums are made, a certain portion of them is reserved for the life insurance component. The remaining one? It is then invested in a variety of securities, including debt funds, equity funds, and others.
Are ULIPs a Good Idea for Freelancers?
As mentioned earlier, ULIPs offer dual advantages. However, that’s just not it. They offer several other benefits that make them an attractive option for first-time buyers or freelancers. Here are some compelling benefits of ULIPs that you might want to consider.
- Helps You Build a Safety Net
Freelancing life comes with freedom. However, you may miss out on certain benefits that are offered to regular employees, such as EPF or life insurance. You can compensate for this with ULIPs. The insurance component provides financial protection for your loved ones in the event of an unexpected life change. Additionally, the money continues to grow with the investment component.
- Needs No Daily Management
For individuals who are starting or who lack sufficient time, managing their funds can be a time-consuming and complex process. However, with ULIPs, you do not have to worry about the same. These come with professional fund management. This means that freelancers simply need to choose the preferred fund type and focus on their freelancing gigs while experts handle their funds.
- Offer Better Flexibility
One of the major hassles with freelancing is the unstable income. Now, this is also why freelancers are a bit sceptical about investing in fixed premiums. With ULIPs, this concern is eliminated. These offer payment flexibilities that can be made yearly or monthly, allowing you to balance your lean months.
- Tax Benefits
Another significant benefit of investing in ULIPs is their tax advantages. For instance, premiums paid are eligible for tax deductions under Section 80C of the Income Tax Act, 1961. The death benefit received by the nominee is tax-free under Section 10(10D).
Freelancing, ULIPs, and What to Do in Lean Months?
For freelancers, some months might be golden, but others can feel short, where you don’t make much. Now, here’s how you can manage such months with ULIPs.
- Grace Period:
Generally, you are offered a 30-day grace period. Here, you are allowed to make payment arrangements for a missed due date. Even if you are unable to make the payment, your benefits are not entirely ceased.
- Reduction in Premiums
Typically, the majority of ULIPs allow you to reduce your premiums upon request. This allows you to invest even in financially tight months without burdening yourself with the initial commitment amount.
Tips for Investing in ULIPs for Freelancers
Struggling with unstable income flow? Here are some easy tips and tactics that may come in handy for investing in ULIPs with such income.
- Baby Steps is All You Need
Consider starting small. Do not overcommit. Choose premiums that you can pay comfortably. In case you earn more, you can use top-ups to invest more.
- Adjustment is the Key
Nothing is predictable, and finances are no exception. In that case, you may want to consider making annual payments. These allow you to save small amounts each month and then make a single payment. By doing this, you ensure you do not have to comply with monthly commitments. Alternatively, if you feel the need to switch to monthly payments, ULIPs offer the same option, which can be arranged by speaking with your insurer.
- Go Short and Easy
For individuals with irregular income, shorter PPT or Payment Premium Time has been a popular choice. Why? Because it allows you to pay premiums for a shorter, fixed term, such as 5 years, rather than your entire policy term.
Wrapping Up
For freelancers juggling unpredictable income, work, and more, ULIPs bring stability through investment and growth. They offer life cover, tax benefits, and investment opportunities in one product. Therefore, helping freelancers with structured financial planning.
