Unit Linked Insurance Plan: Benefits & Returns Of ULIP

In this Policy, the Investment Risk in investment portfolio is borne by the Policyholder The linked insurance products do not offer any liquidity during first five years of the contract. The policyholder will not be able to surrender/ withdraw the monies invested in linked insurance products completely or partially till the end of fifth Year

A ULIP is a combination of investment in equities/debt/balanced funds and insurance. The premium you pay towards a ULIP is divided, with one part going towards your insurance and the other getting invested. You can also choose to pay the premium monthly or annually, as per your convenience.

Now that you know the unit-linked insurance plan and its meaning, read on to know if it is an ideal investment for your needs.

Benefits of investing in a ULIP plan:

• Provides life cover:
  ULIP provides life insurance to you and your loved ones in case of a medical emergency. Insurance is a good investment option because not only does this benefit give you peace of mind, but it also inculcates a habit of saving for a rainy day.
• Higher Risk with probability of high returns on your investment:
  Since a part of your premium is directed to market-linked returns, the investment allows you a chance to earn higher returns with high risk, if compared to more traditional investment avenues. To add to the benefit, in the long run, ULIPs are known to provide double-digit returns to you.
• Flexibility to switch funds:
  ULIP enables you to switch between funds during the policy tenure. Depending on the performance, you can move your funds between equity, balance, and debt funds, based on the market performance and your financial goals and this can yield better results for your investment.
• Tax-benefits:
  Since ULIPs provide life cover to you as an investment option, it is listed under Section 80C of the Income Tax Act, providing you tax benefits. This benefit lowers your taxable income, thus saving your money.
• Ideal for first-time investors:
  If you are a first-time investor or moving from traditional investment schemes to market-linked investment schemes, a ULIP can be the ideal stepping stone. ULIPs provide you with the flexibility to spread your investment across diverse fund types and move your funds when in doubt. To top it off, you can choose your portfolio based on the level of comfort you feel towards market-related risk, while enjoying the benefits of a life insurance cover.

How to choose the best Unit Linked Insurance Plan (ULIP)

The Insurance Regulatory and Development Authority of India (IRDAI) brought about a change in ULIPs in 2010 to increase the lock-in period from 3 years to 5 years. While this itself was seen as a huge commitment by many, financial advisors suggest that you should hold on to an investment for at least 10-15 years to enjoy all  the benefits of ULIP policy.

Since it is a lasting investment, you can consider the below-mentioned points to choose the best ULIP investment.

• Personal financial goals:
  You can choose a ULIP that suits your needs and risk appetite, depending on whether you want to generate money to buy a home, pay for a child’s education, or save for your retirement fund.
• Compare ULIP offerings:
  After deciding the purpose of investing in a ULIP and determining which type of ULIP will help you achieve your financial goals, compare the different ULIP offerings in the market. Take into consideration factors such as premium payments, ULIP performance, etc.
• Consider the degree of risk:
  Everybody's appetite for risk varies, which is why you must take into account the risk factor ULIPs carry since it is a market-linked investment. You can opt for funds that would not be as volatile as the others when choosing a ULIP if you are averse to risk.
• Investment horizon:
  Even the best unit-linked insurance plan in India is pointless if you surrender it in the first three years, as the insurance cover would cease immediately. For this very reason, it is vital that you be certain of your investment choice and be aware of the charges levied on the entry and exit of the policy.

In the end, choosing a unit-linked insurance plan can prove to be beneficial as it would provide an insurance coverage while safeguarding your future financial requirements.

Find out more about the benefits of ulip plans at PNB MetLife.