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4 ULIP Investment Tips To Maximize Returns

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Investment plans also act as tax-planning tools, as many avenues help reduce tax liability. There are different types of investment plans, and by choosing the right one, you can invest according to your needs and grow your savings.Read Less

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins
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Over the years ULIPs have gained popularity as an investment tool because of its dual advantage of providing a life cover and of creating wealth through market-linked returns. Let's find out in this piece how to choose ULIP plan for your investments.

1. Identify your life goals

Before you begin investing, the first step you take is to identify the reason why you are investing. Make a list of your life goals. When you invest towards specific goals, your investments become streamlined. For example, imagine you want to go on a world cruise with your wife in ten years. Now determine the amount you need to fulfil this goal. A simple calculator with basic inflation rate will tell you the approximate money you need. Based on this information, you can identify how much you need to invest in a Unit-linked insurance plans to support your life goals.

2. Evaluate your risk appetite

There is a common mantra in investing: higher the risk, higher the returns. However, taking high risks is not everyone's cup of tea. Some investors are more interested in capital preservation and steady returns. Your ability to take risk depends on your income. If you expect to earn better each year, you can withstand risk and allocate funds accordingly. Investment products should cater to the varying risk appetite of investors. That's why, ULIPs are one of the preferred investment options available for you no matter what your risk appetite is. You can invest from low risk debt funds or balanced funds to high risk equity funds in ULIPs to meet your life goals.

3. Know the charges

Charge structure in ULIPs vary from one plan to another. Thus it is important to understand the charges associated with ULIPs before you invest in them. This will give you a better understanding of your money that is being invested in one or more funds. Insurers deduct a small amount from your premium before investing them in market-linked funds. The amount deducted goes towards various charges like premium allocation charge, mortality charge, fund management charge and policy administration charges. The overall charges however have been capped by IRDAI at 3% of gross yield for policies with term of up to 10 years and 2.25% for policies with more than 10 years term. The good part is that few new-age ULIPs have zero premium allocation charge and policy administration charge, and some are even returning back the mortality charges on maturity of policy, making ULIPs more cost-effective.

4. Assess the flexibility of your investment

Your investments should be dynamic and flexible in nature so that they can be modified as per your need and risk appetite. The structure of ULIPs is such that it allows you to customize your life insurance plan as per your life goal, needs and risk appetite. ULIP investment allow you to choose your premium payment option to be either monthly, quarterly, half-yearly or yearly. This provides you the flexibility to make small contributions every month in a systematic manner rather than investing a large amount annually. ULIPs also provide the option to switch between the equity or debt funds to capitalise on market upturns or downturns.

These tips can help you make better investment choices when you put your money in ULIPs. With steady and regular investments in ULIPs, you may end up with a large corpus of money to fulfil your life goals right on time.

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**Past performance is not indicative of future performance.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.

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*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

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