Importance of investing in an efficient ULIP plan

Posted by ankita on January 27th, 2017

ULIPs are market-linked investment tools offered by insurance companies. A part of premium in ULIPs is successfully reserved to offering insurance cover while the rest invested in market-based funds such as equity, debt or balanced funds. As the policy is revised, ULIPs now stand out as one of the most beneficial products for any medium to long term financial investment plans.  Over the last couple of years, most insurance companies have introduced ULIP products online. Online ULIPs prove both cost-productive and easy to purchase for consumers.

Features of ULIP policy

•Since, ULIP are market-linked plans and the premiums are invested there are charges associated with it such as premium portion charges, store administration, mortality, fund management etc. Purchasing policy online helps to save costs on these charges.

•There are some ULIPs available online that have almost zero structure from asset administration charges per annum. Such advantages make ULIPs much more practical in terms of economic value.

•ULIPs help you avail tax benefits under section 80C of the income tax act up to INR 1.5 lakhs per year your taxable salary for the premiums you pay for the ULIP. The  maturity amount that the nominee receives is also tax-free under section 10(10d) of the income tax act.ULIPs go under EEE tax assessment administration, which means that the income from the assets and the asset esteem at development are tax exempt. Such tax reductions can build the arrival on a venture.

•Most Ulips have a variety of fund options ranging from aggressive equity, diversified equity and balanced funds to bonds or income funds and short-term funds. Choose the ones that suit your investment capability and risk profile. Set your targets keeping in mind your future needs, reservations for unexpected problems and the inflation rates.

•ULIP provide investors with flexible options to choose the policy depending on their preference and capabilities. You can go for low-to-high risk choices under the same policies. This is something unique and helps to find so many buyers for these types of plans. Those who want can easily switch from one fund option to another without any additional charges for the same. Again, it is possible to go for one time increase in your current investment portfolio with higher returns in the future scenarios.

•Policyholders are allotted units with each unit having a net asset value, or NAV declared on a daily basis. This NAV is the value based on which the net rate of returns on ULIPs are determined. The NAV depends on the investments made and the market condition; in other words, the fund’s performance.

 Since ULIP are market-linked funds never get too carried with the markets and keep invested your money in a particular fund or get panic and withdraw funds under heavy losses. Always consult your financial expert before arriving at any consensus about your ULIP plan. If your ULIP is performing well post expenses, then there is no need to exit. But if your ULIP is not performing well compared to similar investments such as mutual funds, then you could consider surrendering it.

You should always ensure that the charges applicable don’t eat up your profits in long run. When you’re young you do not need to really worry about timing the market. Your ULIP can manage to compensate the losses and arrive at sufficient average earnings. But if you are around 40-45 years or your policy is going to mature in the next couple of years, you should definitely think before switching else you’ll lose the earnings of your life. Your decision to switch should be based on the time left to maturity.