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Tips to Invest in ULIPs with Lower Cost

  12/5/17 5:38 AM

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Unit Linked Insurance Plans, also known as ULIPs, were a popular choice for investment prior to 2008. Things changed drastically after the financial crash of the markets back in the same year. Today, investment in Mutual Funds is way more popular than investment in ULIPs. However, markets have stabilized in the past decade and there is no longer a need to be afraid while investing in ULIPs. Instead, investment in some ULIPs can yield better returns at lower costs than investment in Mutual Funds.

Here are a few tips to help you get a good return on your ULIP investments today.

Buy ULIPs Online

It is advisable for you to purchase the modern-day ULIPs, annuity insurance plans, as well as endowment policies online. You can easily choose the best ULIPs investment, if you are well-versed with the way in which the market fluctuates. Also, online investment will allow you to use the internet-based tools that are popular for keeping track of particular market trends to make sound financial decisions.

The best part about purchasing ULIPs online is that you can enjoy the benefits of a nil premium allocation, as well as policy administration charge. These benefits significantly reduce the amount of money that you need to shell out while investing in ULIPs. Premium allocation charge for ULIPs bought offline can vary up to 20%.

Investing for the Long Term

Just like investment in Mutual Funds, investment in ULIPs needs patience. You need to be in the ULIPs investment game for a long period to enjoy the benefits of good returns. The typical holding period for ULIPs investment is 12 15 years.

You also need to prepare yourself to understand market trends both on the equity funds and the debts funds sides. This way, you can make sound financial decisions while crunching numbers for choosing the best ULIPs.

Keep in mind the switching facility of the ULIP funds that allows you to switch from a debt fund to an equity fund. This will minimize your risks and maximize your profits. Availing the benefits of the 5-year lock-in period will allow you to invest a small amount for a longer period consistently.

Purchase a High-Value Life Cover

ULIPs can easily serve the purpose of a tax savings plan too. While investing in ULIPs, choose a life cover that is valued at least 10 times your annual premium. This way you can avail the ULIPs tax benefits in the form of tax deductions too. These tax savings insurance plans can help you avail a tax deduction of up to 1.5 lakh Rs. as per the Section 80C.

Find the Balance between Low-Cost Investment and Good Returns

It is advisable that you do not get lured into low-cost investment at the risk of jeopardizing your potential returns. You need to focus both on the performance of the ULIPs as well as the invested amount. Striking a correct balance between investment and savings is the key to successful ULIPs investment.

One of the most popular low-cost ULIPs is the Edelweiss Tokio Wealth Accumulation plan. Investment at a young age, that is, the mid-20s or early 30s will allow you to invest a smaller amount while reaping significantly higher returns. You can invest in low-cost ULIPs, under the age of 50 years, without the fear of losing the amount to a high mortality charge.


Neha Panchal - Financial Content Writer

Neha used to be an Engineer by Profession and Writer by passion, which is until she started pursuing full-time writing. She's presently working as a Financial Content Writer, with a keen interest in all things related to the Insurance Sector.

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