Everything you need to know about why you should invest in ULIPs

Posted by Jessy Jose on February 28th, 2018

It’s the time of the year when we all take a break from our regular spending and try to find the best investment plans out there so that we can save money on your income tax. You may have a heard a lot about ULIPs in this past year, and are probably wondering if they’re the right place for you to put your money in right now. The answer to your doubts is a resounding “yes”!

Unit Linked Insurance Plans are investment plans that come with a benefit of insurance. They give you the returns of the mutual funds and also the security of life insurance. The premium you pay for your ULIP is divided into two parts. One goes to your insurance and the other is invested in either debt or equity.  What you want to invest in depends on what your investment goals are and what stage of life you’re in currently.

If you’re still unclear about what ULIPs are and how they can benefit you, here’s everything you need to know about them.

1. ULIPs were the most sought after form of investment, but lost their appeal when banks started levying heavy charges going up to 80% of the premium for these policies. The Insurance Regulatory and Development Authority (IRDA) in 2010 put an end to it and capped the annual charges for ULIPs at 2.25% for the first 10 years of holding.
2. ULIPs give you a wide range of investment opportunity. They come in three broad categories, aggressive, balanced and conservative with respect to the equity and debt investment ratio. You can choose the variant that suits your needs the best. 
3. ULIPs allow high level of flexibility. An investor can switch from one investment variant to the other according to the market opportunities. Banks allow a set number of switches for their investors. This is a very important feature of this type of policies, since no other investment policies allow investors to make such switches.
4. ULIPs are very similar to Systematic Investment Plans (SIP). In SIP an investor invests regularly on a monthly or quarterly basis without worrying about the stock market being up or down. In ULIPs the investor invests his money on a quarterly or half-yearly basis. An added benefit of ULIPs is that an investor can also invest one-time amount in the ULIP either to earn from opportunities in the stock markets or if they have an investible surplus in a particular year that they wish to put aside for the future.
5. In recent times insurance providers are offering even more perks with ULIP plans. They give discounts and are selling these policies at the lowest rates, making this the best time to invest in ULIPs.