Beginners Guide To A ULIP Investment and Its Benefits

Due to its mass popularity, low costs and high returns, a Unit Linked Insurance Plan (ULIP) has attracted a vast number of investors. Investment in a ULIP guarantees a long term solution for meeting all your lifelong financial goals, including retirement. With the help of ULIP Policies, an investor can opt for multiple investments like stocks, bonds, and so forth. So if you’re new to the concept of ULIPs and wondering how to go about it, keep reading to find out everything about the same. Take a look:

What is ULIP?

Being a dual product, a ULIP Plan is a perfect combination of investment as well as insurance. Additionally, the best ULIP Plan not only protects your family in times of an emergency but also allows the growth of money over the tenure period of the policy. When you purchase a ULIP Policy, you are securing your family even in times of an unfortunate event. For instance, when the policyholder dies, the insurance company provides a sum assured amount to the nominees of the policy.

How does a ULIP work?

The major functioning of the entire ULIP Policy depends on the premiums paid towards the policy. An investor can pay these premiums annually, monthly or quarterly. The premiums that you pay are typically divided into two main components. While one part of the premium is channeled towards the life coverage, the other half is optimized for investments into equity funds, debt funds, and balanced funds.

On the other hand, investment in a ULIP Policy means the generation of higher returns, unlike endowment policies. Being a market-linked product, the risks involved in a ULIP Investment are typically high. Therefore, investors can make their investments based on their risk appetite. While high-risk takers invest in equity funds, the risk-averse individuals invest in debt funds. In order to yield higher returns, invest in equity funds of the ULIP Policy.

Why invest in a ULIP Plan?

  1. Flexibility

The prime reason why a number of investors opt for a ULIP Investment is because of its flexibility. When you buy a ULIP Policy, you are allowed with flexible options in terms of funds switching as well as the premium payment. While you can select from equity funds, debt funds, and balanced funds, you can pay premiums on a yearly, monthly, and quarterly basis. Opt for equity funds in order to gain higher returns and opt for monthly payments in order to gain rebates.

  1. Longevity

A ULIP Policy allows investors with a lock-in period of 5 years. In order to keep them invested in the policy for a longer duration, the insurance companies also offer loyalty additions. The longer the duration of investment, the higher is the accumulation of wealth. Since ULIPs guarantees the growth of the funds in the due course, it is advisable to stay invested until the date of the maturity of the ULIP Policy.

  1. Affordability

The new-age ULIPs are considered as the cheapest options of investment. Since it allows low costs as well as tax benefits, one can safely say that ULIPs is all about saving more than earning. Besides, a ULIP Investment is typically the most cost-effective solution as compared to other means of investments like mutual funds.

Now that you essentially know all about ULIP Investment and its benefits, what are you waiting for? Whether you’ve already bought ULIPs or you are on the verge to buy one, understanding its details helps you to make informed decisions. The best way to ensure that you land up with the right policy for you and your family is by comparing multiple policies. A comparison between numerous policies makes the concept of ULIP more familiar.

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