Most investors know about Unit-Linked Insurance Plan, as it’s a popular investment option. As we are living in such uncertain times, everyone requires a life cover to safeguard his or her loved ones. Instead of opting for an insurance policy and investing somewhere else for better returns, ULIP offers you a dual advantage. Along with covering the financial aspect of a mishap, you also get an investment component. But before opting for it, make sure to consider some aspects that you need to think through. Go through the checklist below and cross off these things before purchasing a ULIP.
- Purpose of Opting for ULIP
Due to the tax benefits that come with Unit-Linked Insurance Plan, many investors may choose this option for the sole purpose of tax saving. But, instead of doing that, it is advised to also explore the objective of opting for ULIP. Is it building a retirement corpus or creating wealth for your loved ones? On exploring these aspects, you would be able to customise the insurance plan based on your requirements. However, if you only look at it as a tax-saving option, then you could lose out on the perks offered by ULIPs.
- Know Your Risk Appetite
By now, you must be aware that ULIPs have an investment component where you can choose a suitable fund type. Thus, it is recommended to understand how much risk you can take before opting for the one promising more ULIP plans returns. As this insurance option is market-linked, there are no fixed returns. So, you need to consider the past performance of the ULIP funds and learn about the risks involved. Then, you can easily select a fund to earn good returns keeping your long-term goals in mind.
- Understand If Your Goal Is Long Term
Opting for long-term ULIP investment can prove to be beneficial in terms of returns and charges. Though such an insurance plan has a lock-in period of five years, you can continue to invest. But some policyholders may choose to discontinue their ULIP policy and withdraw the funds. However, the impact of various charges associated with ULIP reduce over time and thus, an early exit can be costly. Therefore, staying for the long term shall allow your returns to grow and lessen the charges applicable on the investment.
- Secure a High Sum Assured
Even though ULIP is popularly known for its investment component, you also get a life cover with the policy. As you cannot predict what shall happen tomorrow, securing enough sum assured for your family is necessary. In your absence, the death benefit should fulfil the requirements of your loved ones and offer them financial independence. Hence, estimate the various expenses, loans, and future needs of the family to choose a high sum assured. Though some may advise you to pick a lower sum assured to gain better ULIP plans returns, try understanding both aspects with the help of your insurance provider.
- Learn About Various Charges
Unit-Linked Insurance Plans come with a set of charges that you might be unaware of. Some of them are fund management charges, premium allocation fees, charges of policy administration, switching charges, etc. Learning about these expenses will enable you to understand how much of the premium is being invested towards the fund. You can estimate your returns after deducting such charges from the premium and accordingly, plan your ULIP investment and long term returns to meet your goals. So, don’t hesitate to read the policy documents and discuss the expenses with your insurance provider.
With this, you can be better prepared while purchasing a Unit-Linked Insurance Plan to secure your future. Make sure you check out the ULIP calculator, which helps plan your investment returns efficiently.