How To Take An Informed Decision About Investing In ULIPs?

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How To Take An Informed Decision About Investing In ULIPs?

Today, there are a wide range of financial products available to investors to fit their varying age, goals, risk tolerance, and other factors. When thinking of investments, it is essential to invest in a plan that works with your goals, whether they are short-term or long-term. The goals could be to buy a house, or a car, go to college, get married, travel the world, or anything else.

There are many ways to invest, but the Unit-Linked Insurance Plan (ULIP) is one of the popular choices today. But what is a ULIP policy? It is a long-term investment option that offers investment options as well as life insurance. This tool helps people invest in the stock market, and if everything goes well, they may end up achieving their financial goals. 

ULIP offer both life insurance and the chance to invest. You not only get a life cover, which can help protect your loved ones in case you pass away, but you also get an opportunity to build wealth so you can reach your goals in the future. 

No matter the desire or dream, you need a corpus to fulfil your life goals, especially the long-term ones. You can save up the money you need with an investment plan like a Unit Linked Insurance Plan or ULIP. It might be the right option for you if you seek to protect your family against future uncertainties, while also working towards fulfilling your life goals. With ULIPs, you may be able to achieve two objectives with a single policy.

How does a Unit-linked Insurance Plan work? 

Like most other financial instruments,  ULIP insurance plans also go through two stages:

●     Accumulation phase: In this phase, the investor pays premiums to the insurance company. The frequency of premium payments can be monthly, quarterly, semi-annually, or yearly. The money is put into different funds by the company as per the risk level determined by the policyholder.

●     Reaping phase: This is when the plan reaches maturity. The policyholder can expect maturity returns from the plan, which are the returns from the investments created during the accumulation phase.

Benefits of ULIP

For an investor to build wealth for the future, there are a few ULIP benefits that may help:

1. Since ULIP insurance is tied to the stock market, it could give the investor good returns. The returns earned are primarily dependent on how the market performs.

2. There are many different types of funds in ULIPs, from high-risk to low-risk. The policyholder needs to know their risk appetite to make the right choices. It helps build a diversified set of investments.

3. Unit-linked Insurance Plans, like most life insurance plans, are eligible for tax exemption under Indian law. This means that such a plan can help you earn tax benefits. However, note that tax exemptions cannot be earned under the new tax regime. Only if you have opted for the old tax regime, you may claim exemptions. You may consult your tax advisor to know more about the same. 

When are ULIPs a good investment?

You can invest in a ULIP at any given point in your life. However, it’s advisable to make the investment as early on as possible. Long-term ULIP returns may be affected by how much you invest now. The earlier you put money into ULIPs, the more ULIP benefits you may expect to get. These benefits are linked to factors such as:

1. Power of compounding
2. Higher corpus
3. Higher risk appetite
4. Systematic savings

How to pick the right ULIP plan for you?

Here are some things you should think about when buying a ULIP plan for yourself:

● Think about your life’s goals
● Choose the right amount of life insurance cover
● Think about ULIP charges
● Keep in mind your risk tolerance when choosing the types of funds
● Consider plans that let you switch funds
● Check how different funds are doing
● Check the claim settlement ratio as well as the solvency ratio of the insurance company

If you’re looking to buy a Unit-linked Insurance Plan, a ULIP calculator will be of great help. It considers various factors, including your income, premium paying ability, investment needs, expected cover, and more. It helps you determine the ULIP plans that are ideally suited to your needs. 

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