Ulip Insurance Policy What is ULIP and why should you invest in it?

Posted by ankita on February 22nd, 2017

The unit linked insurance policies refer to insurance products which are a combination of insurance and investment policies.  It is a financial instrument which provides life insurance cover as well as offer earnings through various market-linked funds.  Due to this dual benefit feature it has become a popular financial product. ULIP is a long term investment product and requires commitment and discipline. Thus any individual who is ready for a long term investment with five year lock-in period should go for ULIP.

ULIP allows the policyholder to invest in market through various investment tools like equity, debt, mutual funds or a mix of these. 

Insurance companies invest portion of the premium paid in ULIP in the market and the remaining half is kept aside for providing a life insurance cover. The market invested amount is managed by the fund managers of the insurance company, however, the investment options are chosen by the policyholder.

However choosing  the ideal ULIP are based on various factors like:

• Investment goals: You should always select a ULIP keeping in focus your purpose and ultimate goal of investing like child’s education, child’s marriage, retirement planning, wealth generation, creating a financial back-up, etc.
• Ascertain future obligations: Before selecting a policy ascertain if there are any future obligations required to be fulfilled like paying off any debt, borrowings,, rents or any future monetary requirements.
• Age and risk appetite: Age is one of the most important factors when selecting a particular plan. An individual who is within the age group of 25 years can take higher risk and invest accordingly where as a person belonging to the age group of 25-40 years is likely to invest in an option which is less risky and provides good life cover and returns.
• Policy term and investment flexibility:  When choosing a policy, look for the benefits that the policy provides and select a policy which allows flexibility in investments. One can invest in diverse tools like stocks, bonds, equity, debt funds, etc. that assures good returns based on the market situations.

Investing in ULIP provides the following benefits:

• The policyholder gets the flexibility to invest in multiple tools after  calculating the risks and best returns.

• The policyholder has an advantage to switch between their investments tools, which allows them to maximize their gains as per market conditions.

• ULIP is a tax saving financial product as it provides tax deductions and tax-free withdrawals.

• ULIP allows the policyholder to invest excess cash by making periodic top-ups to the premiums.

• It maintains transparency as the policyholder knows the exact charges and performance of his/her account.

Ulip Insurance Policy can be a good investment option which not only provides a life cover but also good returns on your investment. It is apt for your long term goals.