There are several investments that one can make in order to achieve future goals along with ensuring future financial security for your family members as well. One of the best choices for any portfolio is a ULIP plan. Here is a basic guide to what these plans are, their key aspects, and other important details that you should know more about.
A Guide to ULIP Plan
ULIP plans are essentially financial products that combine both investments and life insurance coverage. With the latter in place, the insurer will pay the fixed sum assured to the nominee of the policyholder in case of his/her demise within the policy tenure (or the fund value, whichever is higher). At the same time, there are options to invest in equity, debt, and hybrid funds of your choice to amass wealth for the future. You can choose funds to invest in as per your risk profile and appetite, while allocating premiums smartly across various asset classes. They have lock-in periods of five years, while there are tax benefits on the premiums payable as per Section 80C subject to certain conditions. You can also use a ULIP Calculator to estimate potential returns based on your investment and fund choices.
Some Added Aspects of ULIP Plans ULIP plans have these key aspects worth knowing more about:
● A part of the premium is allocated for life coverage, while most of it goes into various fund investments.
● You will get market-linked returns that are subject to fluctuations and risks. ● The investment is divided into multiple units, with the value of every unit worked out through the NAV (net asset value) of the fund.
● You can switch your funds periodically, depending on how they perform, market conditions, and changing objectives.
● You can stay invested for longer durations like 10-15 years even when the 5-year lock-in period expires.
● There are specific rules for partial withdrawals once the lock-in period concludes and you stay invested in the plan accordingly.
● You should always understand the diverse charges of ULIP plans, including policy administration, mortality, and fund management charges. These will ultimately impact the final return that you get on your plan.
● You should carefully examine your tolerance and appetite for risk before selecting funds that sync with your preferences, tolerance levels, and future goals.
● Make sure that you are aware of the number of free fund switches available with the ULIP.
● Always compare features, charges, returns, and other policy aspects across multiple insurance companies before selecting a policy.
Signing Off
You should always look at the above-mentioned aspects carefully before selecting a ULIP plan. Compare policies, do your homework, and of course, work out the premium that you can afford in terms of investing and getting decent life insurance coverage. This can actually be the policy that financially secures your family in case something happens to you and also helps you build up a sizable corpus that will help meet your future goals like the higher education of your children, retirement planning, buying a home, etc. Using a ULIP Calculator can further simplify the decision-making process by providing insights into your investment outcomes.