A Unit Linked Insurance Plan, also known as ULIP Schemes, is a type of insurance product that also offers you the opportunity to invest your money and earn high returns. The basic concept of a ULIP plan involves a long-term investment that can give maximized rewards over the course of time.
However, just as with any other type of investment, ULIPs are not a completely risk-free investment. Moreover, there are many online ULIP plans in India, and not all can provide you with the returns you desire. But there are some things that you can do to enhance your ULIP plan returns and get the most out of your invested capital.
This article talks about different ways to improve returns from your ULIP investments. Read on to know more.
How to maximize your ULIP plan returns?
A ULIP is an insurance investment plan that can be used to cover the costs of varied types of expenses, such as higher education, wedding costs, home renovation, travel, and more. However, it is important to follow some steps to improve your returns. While you invest in a ULIP plan, make sure to apply these tips:
1. Set the right financial goals: Another way to get good returns from your ULIP investments is to fix your goals well in advance. Goal-based investing can allow you to stay invested for the right duration, pick suitable fund options, and systematically save for the desired objective. For example, if you are saving for your child’s higher education expenses that you may require 10 years from now, you can pick a ULIP policy with a 10-year policy term. This will ensure that you pick the ideal policy tenure and do not take out your money before the term is over. Goal-based investing can be a great way to improve returns and not deviate from the preferred end result.
2. Invest for a long term: As stated above, a ULIP scheme is a long-term investment plan that reaps the best results if invested for an extended policy term. Generally, there is a five-year lock-in period in all ULIPs. Unfortunately, most people start withdrawing their money after this period. It is vital to know that while you can withdraw your money after the lock-in period is over, it can impact your overall earnings significantly. Hence, this option should only be exercised in case of a financial emergency.
Keep in mind that it can be more beneficial if you let your money stay invested in the ULIP for a longer duration. This way, you can benefit from the power of compounding and grow your money’s worth.
3. Stay consistent with your investment: Another benefit of staying nvested for the long term is the rewards you get in the end. A lot of insurance companies reward their customers for staying invested for the long term by paying them back some fees and charges, such as ULIP fund management charges, policy administration charges, surrender charges, mortality charges, etc. If you do not make partial or complete withdrawals from your policy, the insurance provider will likely waive off these charges. This can add to your overall earnings and enhance them.
4. Make use of the fund switching option: The best ULIPs in India offer the option to switch, from one fund to another, multiple times in a year. This can enable you to achieve the best possible returns on your money. You can study the ups and downs of the market and switch from one type of fund to another and boost your earnings. If the market is on the rise, debt funds can be a great choice. Similarly, if the market falls, you can move to equities.
5. Align your risk appetite with the right funds: You can use the fund switching option to suit your changing risk appetite too. With age and changing responsibilities, your risk appetite is also likely to change. When you are young, you can afford to invest more aggressively. However, if you are nearing retirement, you may want to add more conservative investments to ensure capital preservation. A ULIP can accommodate all of these factors and let you pick fund options that suit your risk tolerance at any given time.
For instance, debt funds can be added to your portfolio as a low-risk investment option if you prefer to keep your risk appetite minimal. However, if your risk tolerance is high, you can move to equity funds and gain better ULIP plan returns. If you like a mix of low and high-risk options on your portfolio, you can choose balanced funds. This will offer your moderate returns with moderate risk.
6. Leverage ULIP tax benefits: Just like any other life insurance product, a ULIP also makes for a great tax-saving tool. The premiums paid towards a ULIP plancan be used to save tax under Section 80C of the Income Tax Act of 1961. The maturity benefits received also qualify for tax exemptions under Section 10 (10D) of the Income Tax Act of 1961 if the total annual premiums fall below ₹2.5 lakhs. This can increase your savings pool considerably and help you maximize your ULIP plan returns.
To sum it up
There are many online ULIP plans in India that can provide good returns. But to ensure that you get your investment’s worth, you must choose the right funds at the right time. Edelweiss Tokio Life Insurance offers the Wealth Secure Plus plan for attractive ULIP investment solutions, along with optimum life cover. The Edelweiss ULIPplan provides investors with the option to make free unlimited fund switches. This allows you to switch your funds based on the market situations and your financial goals.
Remember that the market is ever-changing. And it is important to take advantage of these changes by investing in suitable options. Switching funds at the right time, staying invested for the long term, setting goals well in advance, and sticking to them without deviating from your plan can offer you high returns. In addition to this, you must read your ULIP statement regularly to see how your investments are faring against the market and make necessary changes if needed. It also helps to pick an insurance company that is reliable and trustworthy.
Siddhant Dubey - Writer & Photographer
Siddhant works as a freelance content writer who is interested in a wide range of spheres from photography and personal finance to cooking. He is also an aspiring photographer striving to showcase life around him through his vision.