A ULIP or unit-linked insurance plan is a market-linked financial investment-cum-insurance product that offers you dual benefits of insurance protection and the opportunity to create wealth for future goals. ULIP is a popular choice of investment among retail investors as it helps accomplish long-term goals and offer valuable returns.
While there are several ULIP plans in India, you must choose the one that gives you maximum returns and does not burn a hole in your pocket. So, to help you choose the right ULIP plan, we list down a few tips:
1. Choose a ULIP policy that offers a high number of fund options
Typically, ULIPs offer a wide range of fund options, and the insurance companies give you the flexibility to choose the funds you want to invest. The fundamental purpose of ULIP is to help you grow your wealth while offering insurance protection.
And, with limited funds, you may not be able to diversify your investment, which might impact your returns. Hence, it is vital that you carefully choose a ULIP plan that has a diverse mix of equity, debt and other money market funds. This will help you maximise the chances of getting valuable returns.
Based on your risk appetite and future goals, you can choose between low, mid, and high-risk funds.
2. Choose a ULIP that gives you flexibility
The ULIP plan you choose must give you the flexibility to select and manage asset allocation and your investment portfolio. Many insurance companies also give you the liberty to switch between funds at your convenience based on your changing goals and funds’ performance.
Also, some insurers give you the freedom to redirect the premium payment from one fund to another without incurring any additional charges. Moreover, you can also increase the insurance coverage amount or purchase riders and get additional coverage against specific risks that are not covered under the standard policy.
3. Be aware of the ULIP charges
When you buy a ULIP policy, you must incur specific charges. The charges’ structure may vary from one insurer to the other, but it cannot exceed the limits set by IRDAI (Insurance Regulatory and Development Authority of India). Some of the standard ULIP charges levied by insurance companies include – fund management charges, premium allocation charges, policy administration charges, fund switching charges, etc.
4. Know about the riders offered by the insurance company
As ULIP plans provide life insurance coverage, it is paramount that you check the scope of protection offered. Your ULIP plan must have riders for enhanced financial support and protection, apart from having a high-value sum assured.
When you buy the policy, make sure that you check the riders offered by the insurer. Generally, insurance companies offer a wide range of insurance riders such as accidental death benefit rider, premium waiver rider, critical illness rider, etc.
5. Buy the ULIP plan online
Lastly, it is advisable to purchase a policy online. As many insurance companies issue policies without intermediaries, you can easily get a valuable discount on the premium by purchasing online. Additionally, the process for buying a policy online is much easier; you can easily compare and buy the policy of your choice with just a click of a button.
Please do your due diligence while buying a ULIP policy, as you will be invested in it for a long period. Make sure that you understand the different aspects of the policy before making the final purchase decision. The policy you choose must be feature-rich, give you valuable returns, and at the same time must suit your budget.