5 Things to Consider Before Taking the ULIP Cover

A unit-linked insurance policy provides the twin benefits of insurance and investment under a single plan. ULIPs provide the needed financial coverage for your loved ones with the chance to build wealth. A part of the premium goes towards the insurance while the other half is invested in debt, equity, etc.

Benefits of a ULIP

If you wish for higher returns out of an investment but have no market experience, then a ULIP is a good investment option. There is no need to administer premium payments separately in a ULIP. Also, with no hassle of managing the capital, the ULIP plan gives you the freedom to choose between different market funds according to your risk appetite.

Investment in ULIP also gives you tax benefits as the premium paid is deducted from your taxable income. In a financial emergency, you can withdraw money from a ULIP plan after a lock-in period of five years.

5 Things to Consider Before Buying a ULIP

However, before you buy a ULIP insurance, it is essential to know its features and benefits. Moreover, before making a decision, you should evaluate your risk-bearing capacity, financial goals, etc. Below are 5 things to keep in mind before taking a ULIP cover.

• Evaluate your risk-bearing capacity
  

  Evaluating your risk-bearing capacity is one of the most important things to consider before buying a ULIP plan. Market-linked, ULIP investment involves higher risks. So, invest in the fund type that suits your risk appetite. For example, investing in equity funds is a good option if you are willing to take risks for higher returns. But if you have a low-risk appetite, you can go for debt instruments that give you regular returns. ULIPs also have the option of investing in both funds in particular ratios. Therefore, choosing the right type of fund or combination is vital in ULIP.

• Know different premium payment options
  

  ULIPs have different premium payment options such as regular, limited or single payment. So, you can choose any depending on your financial capability. If you have a lump sum amount, you can pay the premium at once or else you can opt for a regular or limited payment option. In a limited payment option, you can pay a premium for a particular number of years. While in regular payment, you pay for the term of the policy.

• Look for flexibility to change funds
  

  ULIPs offer a choice of switching between different funds according to your risk appetite. Choices are never static, as they may change over time. So, ULIPs give the option to change funds if your risk-taking capacity improves. But, after free switches initially, changing funds involves a cost. So, before a ULIP investment, look for the number of free switches. Also, you should consider the cost per switch afterwards and the flexibility to change funds.

• Look for adequate insurance coverage
  

  Do not forget that you are investing in a ULIP not only for higher returns but also for the cover for the protection of your loved ones. So, ensure the coverage of the ULIP plan is appropriate for your family’s protection in your absence.

• Check for the claim settlement ratio
  

  A claim settlement ratio is the number of claims settled by the insurance company in a specific period. One of the essential things to consider before buying a ULIP plan is to check the claim settlement ratio of the insurance provider. An insurance provider is considered more reliable if they have a higher percentage of claim settlement.

Conclusion

Securing a financial future is a principal goal of life. A ULIP not only gives you insurance cover but also higher returns from your investment. Apart from the above things to consider while buying a ULIP, you should also look for the charges, policy terms and fund options under the plan. After all, an informed decision is an essential aspect of any investment. Visit now to know more about term plan, term insurance, ulip plan, retirement plan, long term savings.

Disclaimer:
The aforesaid article presents the view or an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ before making any decision.

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