While looking for investment opportunities, most policyholders and investors across all income brackets strive to find the optimal balance between present risk and payout margins that materialize in the future.
Today, for an investment to be financially viable at all stages in life, it needs to be suited to the economic bearings of the investor, and also offer the options for customization.
Basic life goals such as education, marriage, a stable retirement should not exhaust a person’s finances at their most vulnerable point in life – knowing this reality insurance providers have given investors access to plans that promise and grow on their investments in a manner and frequency best suited to them. In an effort to streamline insurance and investment practices, and to effort to amalgamate these two essentials, investment providers introduced ULIP plans.
Understanding The Basics
A Unit Linked Insurance Plan is an investment-cum-insurance instrument that is driven towards fulfilling a dual purpose for the policyholder. A ULIP plan is maintained by premiums paid by investors, the frequency of these payments can be monthly or annual.
The basic feature of a ULIP plan is that it uses the paid premium and allocates a part of it towards investments and the rest towards life insurance coverage. The best ULIP plan one is generally market-linked, making them moderately risky. However, an investor may choose between different investment options as per their investment portfolio requirements and risk appetites.
The units stand for the allocated units to the investor which stand for their market-linked investments, similar to equity mutual funds. These units are converted into a corpus on the basis of the NAV that is allocated to them at the time of conversion. Now that you know what is ULIP, let’s know more about its features.
Know Beneficial Features of ULIPs
Now that the fundamentals of a ULIP plan have been established, let us look at some standard features in the best ULIP plans that one can expect to find in India:
1. Financial Security: The best ULIP plans are built on the assurance of sizeable returns with moderate risk as compared to direct equities. Therefore, a ULIP plan can be an ideal solution for investors who have large expenses or monetary commitments in the future such as a child’s higher education, their marriage, travel, and retirement.
2. Customisable: A ULIP plan is known for being more customizable and flexible than most investment or insurance plans. In the event that an investor needs to access their accumulated sum for any immediate expenses, they can partially withdraw their investment with some conditional charges.
3. Dependent Security: Investments and insurances are not limited to a person, as they may have dependents such as a spouse, children, parents, or grandchildren. A ULIP plan and its provided coverage can be grown to be able to cover all expenses such as a child’s education, any medical or incidental expenses.
4. Capital Growth: ULIP plans allow for a steady capital accumulation for future use. Since they are market-linked instruments, they offer significantly higher returns than most investment plans that are low-risk and fixated. This makes ULIP plans as ideal investment solutions for new investors who are looking to build their capital and investment portfolio.
Investing in a ULIP plan can be a useful investment and insurance solution for an investor, therefore before investing one should keep in mind the following things to remember while buying a ULIP plan:
- Read Plan Details: The first and most important step to investing in any investment or insurance plan is to carefully read all requisites, costs, fund choices, insurance coverage metrics, projected returns and any additional charges mentioned within the ULIP plan. One should remember to carefully read through all these details so they are prepared for any costs or liabilities that may arise at the time of investment.
- ULIP Plan Costs: ULIP plans often have additional costs that may not be apparent at the time of choosing a plan, therefore one should remember to check for costs such as premium allocations fees, management fees, initial charges, surrender charges and service charges at the time of looking at ULIP plans.
- Plan Performance: Since ULIP plans offer market-linked capital growth solutions such as investing in debt and equity mutual funds, an investor should remember to keep track of the fund and its performance in the market in the past and compare before committing.
- Compare Plans: As goes for any investment plan, investing in a ULIP plan should also be done after adequate market research. Since there are a variety of ULIP plans in the market, which have their own provisions as per their provider; an investor should compare across all plans to find the best ULIP plan in India for their needs.
- Exit and Entry Charges: Many investment plans have lock-in periods or entry and exist charges that may be levied from an investor. Therefore, an investor should check for these charges within the plan in the event they have limited investment horizon.
Investment plans are stepping stones for investors on their journey of building a strong investment portfolio, a ULIP plan is an ideal way to balance between one’s investment and insurance needs, as it offers customization. Max Life Insurance and their ULIP plans are great choices to start your investment journey in a secure manner, reach out to our financial advisors and choose the best ULIP plan today.