Unit-linked Insurance Plan (ULIP) is a unique financial product that offers insurance coverage and investment opportunities. It is an excellent tool to secure the financial future of your loved ones and fulfil long-term financial goals like retirement planning, buying a home, funding your child’s education, etc.
The premium you pay in a ULIP plan is divided into two portions by your insurance provider. One portion goes towards your life insurance coverage while the rest is invested in equity, debt, balanced funds, etc., to generate wealth.
You can choose the fund allocation according to your financial goals and risk appetite. The investment returns depend on your chosen fund's Net Asset Value (NAV). The risk in a ULIP, on the other hand, depends on the fund type you choose.
Here’s a list of fund options available under a ULIP:
These are high-risk investment options that primarily involve buying shares of companies. Equity funds are suitable if you have a high-risk tolerance since market changes can directly impact your returns.
These funds primarily grow your money in fixed-income instruments like government bonds, corporate bonds, debentures, etc. They involve low to moderate risk levels since they are less volatile than equity funds and offer moderate returns.
These funds are a mix of both equity and fixed-income investments. They provide the opportunity for capital appreciation and stable income and are suitable if you have a moderate risk appetite.
Also known as money market funds, liquidity funds allocate your money in liquid and short-term market instruments such as treasury notes, cash deposits, commercial paper, etc. They are suitable if you do not want to risk your money in equities or bonds.
You may be wondering if a ULIP plan is good or bad. Market-linked investment and volatility may cause fear of losing your hard-earned money. However, it is essential to understand that ULIP allows you to choose funds according to your risk appetite and financial goals.
You can put your money into equity funds if your risk tolerance is high and you want long-term capital growth. Similarly, debt funds are suitable if your risk tolerance is low and you seek capital preservation.
Furthermore, you can switch between ULIP funds as your risk appetite, income or market conditions change. When the equity market is not performing well, you can transfer your money to a debt fund.
On the other hand, you can switch from a debt fund to an equity fund if you think equity investment has greater potential to maximise returns.
A ULIP is considered a good saving and investment tool that offers insurance coverage and lucrative investment returns. It includes various fund options such as equity, debt, balanced and liquidity funds.
You can choose a fund and put your money based on your risk-taking capacity and market analysis. Not only this, you can also switch between funds according to your changing risk appetite, financial goals and market conditions.
However, weighing the pros and cons and risks associated with this financial instrument is essential to make an informed decision.
PNB MetLife Smart Platinum Plus (Individual, Unit-Linked, Non-Participating, Life Insurance Plan | UIN: 117L125V02) is a popular ULIP plan you can consider adding to your investment basket.
Following are a few reasons why not to invest in ULIP for many potential buyers:
The answer to whether ULIP is good or bad depends on your financial goals and risk tolerance. ULIP is a good financial product if you want insurance coverage and lucrative investment returns from a single premium. However, weighing the pros and cons and risks associated with this financial instrument is essential to make an informed decision.
Disclaimer:
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.
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Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka IRDAI Registration number 117 | CIN U66010KA2001PLC028883
Terms & conditions apply, Benefits stipulated are subject to premiums paid and policies in-force. For more details on risk factors, please read the sales brochure and the terms and conditions of the policy, carefully before concluding the sale.
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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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