6 Questions to Ask Yourself Before Investing In ULIP

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6 Questions to Ask Yourself Before Investing In ULIP

When it comes to life insurance policies, Unit-Linked Insurance Plans (ULIPs) are one of the popular choices in India. However, ULIPs offer advantages beyond life insurance, making them a good investment choice. Read on to learn how ULIPs function.

What is ULIP, and how does it work?

A ULIP plan is essentially a life insurance policy with the additional benefit of wealth build-up. The insurance provider divides your capital between investments in equity, debt, or a mixture of both types of funds. While the life cover protects your family’s financial goals in your absence, the investment option helps you create a significant fortune over time.

ULIPs have a lot of flexibility when it comes to investment. You have the freedom to choose the funds to invest your money in your preferred funds and switch between them as per your changing requirements. Varied forms of ULIPs are available in the market. Before purchasing a policy, consider asking yourself the below questions so that you can pick the right plan.

1. Does the plan meet your needs?

Before selecting a ULIP, ensure that it is suitable for your financial planning. If you wish to earn high ULIP returns, it is vital to keep your money invested in the funds for an extended period. In case of monetary emergencies, ULIPs allow you to withdraw a portion of the investments. However, you can only do so after the initial five-year lock-in period. Hence, you must choose to invest in ULIPs, keeping these conditions in mind and after determining if the policy is useful for you.

2. What are the ULIP charges?

When investing in ULIPs, remember that the insurance company charges you specific additional fees. There was a time when insurers used to deduct high charges from the premium, which reduced the returns. However, the Insurance Regulatory and Development Authority of India (IRDAI) mandated some changes, resulting in lower charges and more returns. The ULIP charges include fund management fee, premium allocation fee, administrative fee, mortality fee, and more. When purchasing a ULIP, find out about its expenses and determine if the policy is beneficial for you or not.

3. What is the ideal sum assured?

When selecting a ULIP plan, it is vital that you opt for an adequate sum assured to meet the monetary needs of your dependents. The amount must cover your family’s life goals if you cannot be there for them. The sum assured value depends on the premium that you pay. You can opt for a single premium payment alternative or pay it regularly, depending on your requirements and choose the sum assured accordingly.

4. How did the ULIP perform in the past?

The returns from your ULIP depend on the market condition, as the insurer invests your money in equity or debt funds. So, you need to inquire how the funds have performed over the last few years. This will give you an idea about the estimated returns that you can receive from the policy.

5.What kind of flexibility do you get?

ULIP funds have become favoured investment instruments because of many facilities, like fund-switching, top-up option, premium redirection, partial withdrawal, and more. However, most ULIPs come with limits on how many times you can withdraw or switch funds for free. Find out about this before investing in a policy.

6. What extra benefits can you expect?

Apart from maturity and death benefits, you can avail of other advantages from ULIPs. Nowadays, ULIPs also have offerings, like loyalty additions and guaranteed additions. These features provide more returns at specific intervals, ensuring higher profits. When deciding which ULIP to buy, check if it provides these benefits to ensure higher yields.

It is simple and time-saving to compare ULIP funds online. Now that you know what to look for in a ULIP, search for a policy that will help you meet your financial aspirations.


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