Investment is an essential requirement owing to the enormous benefits it offers in terms of saving and helping existing funds increase. Investment can also be intended towards ensuring your own protection such as through insurance plans.
In recent times, Unit Linked Insurance Plans (ULIPs) have emerged as a very popular investment instrument owing to their ability to do both. Read on below to learn about how ULIP works and the different advantages of ULIP that will be extremely useful to you.
What are ULIPs?
ULIPs have emerged as one of the preferred investment plans available in the market as they offer the dual benefits of an insurance cover and an investment for your life goals. You can customize the ULIP plan according to your life goals and risk appetite.
Thus, you can choose the ULIP funds in which you wish to invest, namely, debt, equity or a mix of both. If you pick a mixed option, you can also choose how much of it will be dedicated towards investing in either instrument; depending on your risk profile.
How ULIP Works
The process of availing ULIP insurance and as an investment is simple. Read on below to understand the steps involved.
Step 1. While opting for a ULIP policy, you need to decide the amount you wish to pay as premium and the frequency of your payments. You can choose to make the premium payment as a lump sum or at monthly, quarterly, half-yearly or annual intervals.
Step 2. Units of the premium you pay will be allotted towards different funds. These funds can be equity-based, debt-based or even a hybrid fund, which invests in both equity and debt securities.
Step 3. You can also switch between ULIP funds if your risk profile or life goals change. You can also opt to switch funds based on market performance and if you believe that, you can get better returns by investing in a different fund.
Step 4. While understanding how ULIPs work, the first thing you need to know is the lock-in period. During the lock-in period, you will be unable to withdraw any amount All ULIPs have a lock-in period of 5 years.
Step 5. Upon maturity of the ULIP, you will receive the fund value, which can be redeemed through the units allotted to the funds.