While wealth creation is something that you should investigate, protecting your family from life’s uncertainties are also equally important. Contrary to popular opinion, you don’t have to invest in multiple investment options to satisfy both goals, fortunately.
Instead, you can ensure that you both create wealth and keep your family financially well protected by simply investing in a ULIP. A ULIP is a highly flexible insurance cum investment option that gives you benefits such as the ability to enhance your wealth creation ability at a later point in time through the payment of additional premiums.
Want to know more about how you can enhance the potential of a ULIP through additional premiums? Here’s everything you need to know.
What is a ULIP?
However, before we get to the main part of the article, let’s pay a quick visit to the concept of a ULIP. Also known as a Unit-Linked Insurance Plan, a ULIP is an insurance cum investment plan that provides both the benefits of insurance and investment.
You, as a policyholder, would be required to make regular payments, known as premiums, to an insurance provider. The insurer, in turn, would provide you with a life cover and invest the premium that you pay in funds of your choice.
On the expiry of the tenure of the Unit-Linked Insurance Plan, you can withdraw the funds that you’ve invested in, along with the returns that may have generated. On the other hand, if something were to happen to you during the tenure of the ULIP, the insurer would pay a predetermined sum of money to your nominee as compensation.
What is the Additional Premium on ULIPs?
Now, at the time of purchase of a Unit-Linked Insurance Plan, you can choose the amount of premium that you wish to invest in funds of your choice. However, once you’ve chosen the premium, you would have to continue paying it regularly on time till the end of the premium payment term.
But what if you receive some windfall gains, bonuses, or simply have an excess of funds lying around? Can you invest them in a ULIP? Fortunately, it is possible. By utilizing the additional ULIP premium payment option, also known as the top-up facility, of a Unit-Linked Insurance Plan, you can make single lump sum top-up payments,
This additional ULIP premium that you pay will be invested in the market-linked funds of your choice along with your regular premium payments. That said, you should know that it will not, however, increase your life cover or the tenure of the plan because that entire amount is purely invested in the funds and no portion from that amount goes as a premium for life cover.
The additional premium payment facility offers plenty of benefits to the policyholder of a Unit-Linked Insurance Plan. Here’s a quick look at a few of them.
- It allows you to put unused funds to good use by investing them in the funds of your choice.
- It allows you to enhance the fund value, thereby increasing the chances of market linked wealth creation.
- Some ULIPs allow policyholders to invest the top-up premium in a different fund of their choice.
As you can clearly see, the ability to make additional premium payments is an advantage of a ULIP. This facility allows you to grow your returns without having to purchase another separate Unit-Linked Insurance Plan. That said, the terms and conditions tend to vary from one ULIP to another. Therefore, it is advisable to read through the policy terms and conditions carefully before making any additional premium investments.