Factors to know before you buy ULIP plans...

Posted by ankita on January 10th, 2017

ULIP plans has brought a revolution in the life insurance market as they provide investors with a flexibility which traditional plans have lacked to offer consumer. Various innovative features, good potential for returns, short to medium term or long term tenures, inflation-adjusted returns are some of the features offered by ULIP plans. And if you add life insurance cover for protection purpose, ULIPs becomes the most sought after products of life insurances.

ULIPs evolved a decade ago; the ones which are available now in the markets are changed and presented in a better manner with more evolved features. Often due to various types of market-linked funds it becomes a daunting task to choose the best Unit-linked Insurance plan to secure your financial future. It is advisable you consult a financial expert before jumping to any conclusion on choosing a ULIP plan.

Let’s understand how ULIP works? The premium paid for your plan gets adjusted for the relevant charges which are mentioned in the policy structure. Net premium is then invested in funds such as equity, debt or balanced funds. Every fund represents different risk profile and related return potential. You can choose the fund based on your risk appetite, financial goals and income source. If you're risk taking person go for equity investments, alternatively a risk-averse investor can go for debt-oriented funds. The ground rule follows that the earnings that you derive from equity-based funds should be moved to debt funds so as to produce safe returns towards the end of the policy tenure.

The fund value reflects your growing corpus by way of NAVs. On maturity, this fund value is paid while on death, higher of the sum Assured promised or the available fund value is paid.

•While choosing your best ULIP plans the first and foremost thing that’s considered is the charges applicable on your policy. The charges will lower or increase the premium amount which is invested in the market. Lower the charges higher would be the premium invested and higher would be the resultant fund value. So, when comparing plans, compare the charges and pick the one with the lowest charge structure.

•Online UILP plans don’t incur premium allocation charge as the middlemen or agent is eliminated in the selling process. So, online plans could be considered for policy purchase.

•Although, there are three basic funds i.e equity, debt or balanced funds, companies have segregated these basic funds and come up with a variety of options. Higher the fund options, more diversified would be your asset class and better for your investments.

•Check if there is any form of flexibility in premium payments and tenure. While some policyholders pay premiums for the entire duration, other want to pay a limited period premium, some prefer one-time investment. So, consider your premium paying preferences and choose the plan accordingly. Also, your plan should allow you a term selection which is in tandem with your financial goals.

•Investing in ULIPs lures you by the return potential. So, if returns are your objective focus on future projection & market movements. Historical NAV growth or the performance of the funds over the years is available with the insurance company. Go through it well and then choose the plan with a stable and consistent performance record.

•Riders are another good option that can offer comprehensive coverage. A good availability of riders or rider which fit your needs could be considered while comparing plans. 

ULIPs are a good investment tools for market savvy investors. Anyone who has the capability to handle portfolios prudently can buy a ULIP. They can stay invested for a long and enjoy the life cover and simultaneously reap the benefits of equity or debt investment. Once you figure your needs you can create the best Ulip Insurance that can secure and insurance the future of you and your loved ones.