How to Invest in a ULIP fund?

How to Invest in a ULIP fund?

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Financial planning is essential to secure the future of loved ones and family members. This can be achieved by researching different investment avenues and thereafter investing in the funds that can give returns as well as impart a guaranteed or regular income. One such investment avenue which stands out is ULIP insurance.

What is a ULIP Plan?

A ULIP plan or a Unit-Linked Insurance Policy is popular among those looking for an investment option that can provide them with considerable returns. This has drawn the attention of many investors, both seasoned and new, to the unit-linked insurance policy. Hence, ULIP is a type of insurance wherein the premium paid by the policyholder gets further divided into two separate parts. First, some portion of the premium amount is invested in either equity, debt or a combination of both funds. The remaining amount is invested in securing the life cover of the policyholder. Moreover, the ULIP returns are exempted from tax.

Is it a Good Idea to Invest in ULIP?

In essence, a ULIP is neither a life insurance policy nor an investment plan; rather, it is a hybrid of the two.  Like a mutual fund, the aggregate premiums collected by the insurance firm selling such plans are pooled and invested in various mixes of debt and equity instruments.

As a result, ULIPs provided by some of the leading insurance service providers, such as Tata AIA Life Insuranceand many others, offer both protection and growth.

How to Choose the Best ULIP?

Since a ULIP Plan is a long-term investment, it is best to evaluate them based on a few criteria before making a decision. Here are a few pointers to help you choose the best ULIP fund to invest in.

Prefer more options

A solid ULIP or unit-linked insurance policy typically provides at least 6-8 fund alternatives. Therefore, always choose a ULIP that allows you to invest in a variety of asset classes.

Options for premium payment

You should always choose a premium structure that is more convenient and meets your needs. The greater the number of possibilities, the greater the freedom to select.

Avoid paying additional money

Choose the ULIP with the lowest fees. A decent ULIP insurance will invest your complete premium without taking any premium allocation charge into account. In addition, one of the key characteristics of a ULIP is the ability to move funds between debt and equity markets. Make the most of this perk by selecting a plan that includes a set number of free switches.

Maturity benefits

Make sure the insurance you choose or make ULIP investment fund offers you a superior maturity benefit to the rest of the policies. For example, select a ULIP plan that provides a bigger sum assured or a higher fund value for your plan.

Compare

Finally, compare all of the plans based on the criteria listed above before settling on a ULIP that meets your needs.

Which is the Best ULIP Fund?

 The best ULIP depends on what your needs are and is categorised by risk.

Equity Funds

These ULIPs generally invest in high-risk equities and company stocks. They are the riskiest ULIP investment but also the most rewarding. Income, fixed-interest, and bond funds: Your funds will be placed in government securities, fixed-income securities, corporate bonds, and other similar investments that have a medium risk and reward.

Cash Funds

If you invest in these ULIPs, your money will be allocated towards money market funds, cash and bank deposits, and other low-risk money market instruments.

Balanced Funds

Because they vary the amount of investment that flows to different places, these are the most reliable and wise investments.

Conclusion

The ULIP fund gives you a comprehensive investment strategy that ensures a secure future. But, it is advised first to study the fund properly, do a background check and then only buy ULIP Policy. In this case, one can also seek professional guidance before making any investment.

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