A Unit Linked Insurance Plan, or commonly known as a ULIP plan, is an insurance plan that also lets you invest your money for high gains. A ULIP investment offers a variety of investment options in equity, debt, and balanced funds, along with a life cover that keeps your loved ones financially protected and secured.
ULIP returns are amongst one of the safest and highest when it comes to investment options in the country. But to be certain of your choice, you can use a ULIP calculator to ascertain your earnings before you invest any money.
ULIPs make for a great addition to your investment portfolio for various reasons. Some of these have been discussed in this article.
How does a ULIP plan work?
The concept of ULIP is simple. When you invest in a ULIP policy, your invested capital is divided into two parts. One part of the premiums you pay is used to secure your life and offer protection to your loved ones in your absence, and the other part is used to invest further to generate ULIP returns.
A ULIP offers diverse types of funds that can be suitable for all risk appetites and goals. So, you can pick options as per your life stage and unique needs. In addition to this, the insurance company may also offer you loyalty additions and boosters as rewards for staying invested for a long time. These add to your overall earnings.
What are the benefits of investing in ULIP funds?
There are many advantages of a ULIP investment, such as:
1. Can give good returns: ULIP funds can offer you significant returns over time. ULIPs are long term investments that can garner great returns if invested in the right combination of funds.
2. Secures your loved ones: You can leave a legacy behind for your family members with a ULIP insuranceplan. ULIPs offer a high sum assured that can secure your family’s future needs, such as higher education, marriage, healthcare, and more.
3. Offers flexibility: A ULIP allows you to switch between funds as and when you like. This way, you can take advantage of the changing market conditions. You can either choose a portfolio yourself or let your insurance provider do it for you if you do not wish to time the market yourself.
4. Provides you with a second income: ULIPs can offer you a second source of income. You can use a Systematic Withdrawal Plan (SWP) for your money, such as monthly, quarterly, semi-annually, or annually. This can be a viable retirement plan.
5. Safeguards you in emergencies: ULIPs can be suitable for both short term and long term needs. You can opt for a shorter term and withdraw your money after five years. This can be a great emergency fund option.
What are some things to consider before buying a ULIP?
Before you buy a ULIP fund, here are some things you must keep in mind:
- Check out the Claim Settlement Ratio (CSR) of the insurance provider
The claim settlement ratio is the ratio of the claims raised and the claims settled by an insurance company in a year. The higher the claim settlement ratio, the better can be the claim settlement process at the time of maturity.
- Look at the charges involved
Some insurance companies can charge high fees, such as policy administration fees, premium allocation fees, fund management fees, etc. Some policies also have high surrender charges and mortality charges. Compare the costs involved before you pick a ULIP.
o Pay attention to the reason to pick a ULIP as an investment option
A ULIP can be used for various needs and requirements, such as higher education, marriage, retirement, a home purchase, as well as short term goals like travel, car purchase, etc. The reason behind your investment will help you pick out the right policy term and funds.
o Check the performance of the fund
ULIPs let you invest in a variety of fund options, such as equity, balanced, and debt funds. While your risk appetite plays a crucial role in deciding the right combination of funds, the fund’s past performance is equally important while making a decision.
- Find out the premiums
You can pick a plan as per your income and budget. You can look for a plan with affordable premiums that makes it easy to invest and safe.
- Look at a short lock-in period
The lock-in period in a policy determines the time you can withdraw your funds. Typically, ULIPs have a five-year lock-in period. This implies that you can only take out your money after five years from the date of purchase. Keep this in mind before you invest.
Wealth Secure Plus: ULIP plan of Edelweiss Tokio Life Insurance
o Three options to choose from - Individual Option, Joint Cover Option and Child Option
o Affordable premiums that start from as low as ₹1000 per month.
o Loyalty additions and maturity additions to increase your overall earnings.
o A Systematic Withdrawal Plan (SWP) for payments as you like - monthly, quarterly, semi-annually, or annually.
o Seven diverse funds to choose from.
o The option to invest in for a minimum of 5 years and then withdraw your money to meet your expenses.
o Tax benefits under Section 80(C) and Section 10(10D).
To sum it up
A ULIP insuranceplan can provide you with financial security, peace of mind, and investment growth. This single policy takes care of multiple needs, such as leaving behind a legacy, preparing for your future, and much more. However, with the investment component involved, make sure to consider essential aspects like the claim settlement ratio of the insurer, the fund options, and the fees involved. This will ensure that your money is invested safely and you get to earn high returns.
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.