Over the years, one particular investment that has stood out due to its benefits is a United Linked Insurance Plan (ULIP) – an investment-linked plan with life insurance cover. A ULIP is a perfect amalgamation of insurance and investment with a strong potential to cater to your financial needs. It is important that you select the right ULIP insurance plan with competitive features and attractive returns.
Here is everything you should know about selecting good ULIP plans as per your financial needs:
What is a ULIP Plan?
A ULIP plan is a combination of both insurance and investment components. When you invest in a ULIP policy, a portion of your premiums is used to provide a secure life insurance cover. The remaining part of your premiums is invested in the ULIP funds, including equity, debt, or a combination of both.
The investment choices depend on your age, risk tolerance, investment horizon and financial objective such as retirement, children’s education, buying a home, etc. You can change your asset allocation over the tenure of the ULIP plan. Some firms allow unlimited free switches, whereas others charge for it beyond a particular free limit.
Besides these advantages, the ULIP premiums are exempt from taxes up to Rs 1.5 lakh under Section 80C of the Income Tax Act, 1961. Further, the maturity proceeds and death benefit are free from taxes under Section 10(10D). That said, some tax exemptions regarding the maturity ULIP amount have been recently amended in Budget 2021.
How to choose the right ULIP plan for your needs?
Here is a step-by-step guide to select the best ULIPs in India for your financial needs:
- Estimate your family’s needs: When you invest in a ULIP, you get a secure insurance policy that can financially protect your family in case of your absence. Hence, you must select an insurance sum that caters to the needs of your family and helps them maintain their standard of living even after you are gone. Take an amount that can pay off your outstanding loan, EMIs, mortgage, household expenses, etc. It is advisable for you to choose a high sum insured to safeguard the interest of your loved ones.
- Know your risk appetite: A good ULIP plan allows you to invest in different ULIP funds - stocks, bonds, or a combination of them all. The funds you choose are dependent on your risk tolerance. So, if you are young and can afford to take high risk, you can invest in funds that comprise heavy investment in equities and less in bonds. Equity-based funds have the potential to offer higher returns. However, they also come at a high risk of loss due to market volatility. Alternatively, if you are near your retirement age, you can invest more in bonds and preserve the capital for your future. Bonds are low risk and offer assured returns. If you are a mid-risk investor, you can opt for a balanced fund with a good combination of bonds and equity.
- Define your tenure: Your financial goals and ULIP scheme tenure play a critical role in picking out a ULIP. You should choose a policy tenure that helps your wealth grow sufficiently to power your future goals. Precisely, the tenure of your policy is dependent on your financial objectives. For instance, if you are young (in the 20s and 30s age bar) and are investing in a ULIP scheme to save for retirement, you can opt for a longer policy term, take high risk and invest in equity-based funds. Alternatively, if you are saving to pay for your child’s higher education, you can select a tenure that precisely matches that duration. In such a case, invest in debt-based or balanced funds that offer secure returns at low risk.
- Check for add-ons and flexible options: Your goals, income, risk appetite, etc., change as you advance through the various stages of your life. You would need to accommodate these changes in your ULIP plan with time. Hence, when choosing a policy, it is beneficial to opt for a ULIP plan that offers flexible features. For instance, a ULIP plan that allows unlimited or many free fund switches are an ideal choice. Moreover, you can pick a plan that offers partial withdrawals to help to fulfil an urgent or unexpected expense. Besides, it is good to take a ULIP policy that offers several add-on riders like Accidental Disability, etc., to enhance your insurance cover.
- Know the claim settlement: The claim settlement ratio (CSR) indicates the number of claims settled by the insurer per every 100 claims. Hence, it is good to select a company with a high CSR as that will provide you with an assurance that your family will easily get the insurance claim in your absence. The claim settlement ratio gives a fair idea of the efficiency of the insurer in settling claims.
Trust Wealth Plus by Edelweiss Tokio Life Insurance
The Wealth Plus ULIP plan by Edelweiss Tokio Life Insurance provides you with a dual benefit of a life cover and the opportunity to grow your savings. You have the freedom to invest in different funds as per your risk tolerance and financial goals.
Further, you have an option to choose from several types of investment strategies. You can opt for a self-managed Edelweiss ULIP plan where you make all your investment decisions and get unlimited free switches. Otherwise, you can opt for Life Stage and Duration Strategy, where an expert will manage the funds on your behalf in return for ULIP charges.
Apart from these other features of the Wealth Plus plan include:
- Comprehensive insurance coverage
- Flexible features and attractive returns
- Additions to your savings from the first policy year onwards
- Rising Star Benefit that offers an additional lump sum to your child and waives off future premiums while keeping the policy benefits intact in case of your demise.
- Partial withdrawals beginning from the sixth policy year.
- The choice to maximise your fund value and get better returns through top-ups.
- Eligible for all ULIP taxation benefits
Investing in a good online ULIP plan in India enables you to take advantage of economical premiums, better returns, and flexible features. Choose your investment-linked insurance plan wisely to adequately safeguard your and your family’s future.