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What is a ULIP plan?

Oct 10, 2018

It doesn't matter if your 20, 35 or 50. Whatever your age, you are sure to have certain life goals and dreams that you hope to fulfil. You may want to complete your MBA, or perhaps you want to make a down payment on your dream home. Whatever be the reason, to be able to fund your life goals you need corpus. You can use an investment tool such as a Unit Linked Insurance Plan, or ULIP, to help you save up the money required. But, what is a ULIP?

Unit Linked Insurance Plans are tools that offer a combination of investment opportunities and life insurance. ULIPs are generally considered to be one of the most sought after insurance offering.

How Does ULIPs Work?

Although an insurance offering, a ULIP also works as a goal-based investment tool that has been designed to help you meet your financial goals. Before you invest in one of these plans, you need to understand where your money will be invested.

As with any insurance policy, you will be required to pay a premium for your Unit Linked Insurance Plan. Part of the money from your premiums will be invested in a number of funds. If you have a high risk appetite, you can choose to invest in equity funds. On the other hand, if you aren't willing to take too much of a risk, you can put your money in a debt fund. To enjoy the benefits of returns without high risks, people also prefer investing in a balanced fund. Since the investments are made to help you meet your financial goals, you can choose in what kind of funds your money should be invested in.

Insurance companies allow you to switch between funds from time to time. There is no tax implication on the same and you can make a decision to switch based on the market movement and investment goals. For example, if a particular fund is underperforming, you may switch to the one that delivers better performance. You can also switch from one asset class to another based on your changing life goals. For instance, when you are young at the start of your career, and have lesser responsibilities you can opt for higher risks and invest in equity funds. However, as your responsibilities increase and you move closer to your retirement age, you may opt for debt funds that deliver lower returns.

Are ULIPs Good for Me?

Before you decide whether or not you want to invest in this insurance product, there are a few things you need to think about:

1. Why Are You Investing?

ULIPs have been designed to help you meet your financial goals. So, before you invest in a goal-oriented plan, make sure you outline your financial goals and invest the right amount of money in the right type of funds accordingly.

2. What Kind of Charges Do I Need to Pay?

Since ULIPs offer individuals both insurance and investment, there are charges that come with investing in such a plan. Before you decide to put your money into a ULIP, make sure you educate yourself on the kind of charges that each insurance provider levies on their ULIPs.

3. How Do I Decide My Insurance Cover?

It's important to remember that along with investment opportunities, ULIPs also offer life cover. They are first and foremost insurance products, so you need to choose adequate life cover for yourself to safeguard your loved one's future. If you opt for the maximum sum assured offered by a provider, your family will be provided with higher financial backing in the event when something happens to you.

Now that you have a better understanding of what is a ULIP plan, you can safely decide how and where you need to invest your money. If you're ready to safeguard your future, browse through different ULIP Plans that suit your needs.

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