Amongst several financial products, the most popular are Unit Linked Insurance Plans, which are a dual benefit scheme of insurance and investments. Investing in a ULIP ensures a great platform to shape a financially secure future with simultaneous equity growth over the years, but like all investment entities, strategic planning and building knowledge about market dynamics are prerequisites. This article will discuss those subtle and effective tips to boost the returns on your ULIP investment.
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Let's not discuss the strategies to enhance return without first understanding the very basic structure of the ULIP. While a part of the premium paid is used as insurance, the rest is invested in equity, debt, or balanced funds as per your appetite for risk. You can switch from one fund to another; thereby, you are the person in charge of your investment in a ULIP.
Getting to know about the components of ULIP investment, charges—such as premium allocation, fund management, and mortality charges—and lock-in periods is the first step to optimizing your returns.
Before maximizing your returns, it is very crucial to understand ULIP meaning and how it works. Generally, part of the premium paid is set against life insurance and the rest is invested in the funds, either in equity, debt, or a mix. Another very interesting feature of the ULIPs is the option of switching between these funds to manage one's portfolio actively. You should be aware of the charges related to a ULIP, like premium allocation charges, fund management charges, and mortality charges, to make better decisions. You can check out the structure of Mera Wealth Plan.
ULIPs are structured for long-term investments, with a lock-in period of at least five years. To take maximum advantage of a ULIP investment, one should stay in the plan for a time horizon considerably larger than the lock-in period. The power of compounding ensures one's money grows exponentially with time given that he is invested long term. Long-term investments also help to smoothen out the short-term market fluctuations, offering superior overall returns.
It is significant to track the appropriateness of your ULIP investment to meet your financial objectives from time to time. Monitor the performance of the selected fund within your ULIP against relevant benchmarks for the assessment of the fund. In case of consistent underperformance, consider investment transfer into funds with better performance. Also, such reviews at intervals will help a person capture market movements in order to have a timely portfolio rebalancing.
ULIPs also come with variations that further incorporate ways to invest top-up investments, which are money to be invested over and above the normal premium. This can particularly be useful in the case of surplus funds or when you would like to take further investment exposure in a down market. Apart from the fact that the corpus would increase, top-up investment is tagged to enjoy the same tax benefits as your regular premiums.
ULIPs have various charges linked to them, such as premium allocation charges, fund management, and policy administration fees. These charges may be at the maximum level as per the regulations, but they may still erode your overall returns. Always compare with different insurers and go for a ULIP that has the lowest charges, allowing you to invest the maximum portion of the premium in the market.
It allows partial withdrawals after the lock-in period has elapsed, but it is always wiser not to. Premature withdrawals hamper the compounding effect and might even severely harm your potential returns. Stay faithful and committed over the long term for meeting financial goals.
ULIPs have uncountable tax breaks within the scope of the Income Tax Act. There's a deduction available on premiums paid under Section 80C, and the maturity proceeds are also exempt under Section 10(10D) with a few terms and conditions. Besides, switch funds in a ULIP are also exempt from capital gains tax—all these make up for the overall profitability of your investment.
In that case, for beginners to ULIPs or novices at investing, it is always good to take the advice of financial advisers. They may guide you in selecting the right plan under ULIP, optimizing fund allocation, and developing a plan corresponding to your goals and risk profile. They would be able to guide you to avoid pitfalls and achieve maximum returns.
It requires a combination of careful planning, disciplined investing, and active fund management to boost returns on your ULIP investment. Selecting the right plan, optimum usage of fund-switching options, staying invested for the long term, and minimizing charges can unlock the complete potential of your ULIP. With a focused approach and regular performance monitoring, your ULIP can be the most powerful tool to achieve your financial aspirations.
In simple words, A Unit Linked Insurance Plan is a financial product which combines the best of life insurance with investment. For this, the part of the premium goes to the life insurance cover, and the rest of it is invested in equity, debt, or a mix of both as chosen by the policyholder.
A switch in funds allows ULIP policyholders to shift the investment between equity, debt, and balanced funds. This facility helps you adapt to market conditions and fine-tune your portfolio with your financial goals or your ability to take risk. Generally, the number of free switches allowed by the insurer per year is limited.
No, ULIPs are not suitable for long-term investments. Their minimum lock-in period is five years. Returns can be optimized only when you stay in the investment for a relatively longer duration. Long-term investments will also help reduce the shocks of market volatility.
Piyush Kataria, SEO Manager at PNB MetLife, is a seasoned digital marketing strategist with over a decade of experience in optimizing websites for search engines. His expertise extends to keyword research, content strategy, technical SEO, and link building, all of which have been instrumental in driving organic traffic growth at PNB MetLife. With a strong foundation in life insurance, Piyush leverages his industry knowledge to create targeted and effective SEO campaigns.
Sakshi Malhotra is a seasoned marketing professional associated with the Life Insurance industry since 2007. At PNB MetLife, she heads Digital Marketing and Direct to Customer line of business. She is responsible for driving effective customer engagement through the company’s website and social media channels. In addition, she drives customer online buying journeys to help them buy the right product.
The aforesaid article presents the view of 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 or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
PNB MetLife India Insurance Company Limited
Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka
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Goods and Services Tax (GST) shall be levied as per prevailing tax laws which are subject to change from time to time.
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Call us Toll-free at 1-800-425-6969, Phone: 080-66006969, Website: www.pnbmetlife.com, Email: indiaservice@pnbmetlife.co.in or Write to us: 1st Floor, Techniplex -1, Techniplex Complex, Off Veer Savarkar Flyover, Goregaon (West), Mumbai – 400062, Maharashtra. Phone: +91-22-41790000, Fax: +91-22-41790203.
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By submitting your details, you agree to PNB MetLife's Privacy Policy and authorize PNB MetLife and/or its authorized service providers to verify the above information and/or contact you to assist you with the policy purchase and/or servicing. You have the option to opt-out of this contact authorization by un-checking the box. The authorization provided by you herein will supersede all earlier authorizations/registrations made by you in this regard.
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