Back
Share
© 2021 KlarifyLife. All rights reserved.
Disclaimer:
In this policy, the investment risk in the investment portfolio is borne by the policyholder. The Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender/withdraw the monies invested in Linked Insurance Products completely or partially till the end of fifth year.
Building wealth while keeping your loved ones protected can be a balancing act. That’s where a unit linked insurance plan (ULIP) comes in, blending insurance coverage with market-linked investments in one neat package. In this blog, we’ll walk you through how ULIP benefits stack up against other popular investment avenues—like mutual funds and fixed deposits—so you can decide if it fits your financial game plan. We’ll also shine a spotlight on the benefits of ULIPs, helping you see why this hybrid approach might just be the missing piece in your long-term financial puzzle.
Understanding ULIPs (Unit Linked Insurance Plans)
A unit linked insurance plan (ULIP) is like a two-in-one package, combining life insurance coverage with an investment component. The life cover portion helps safeguard your family’s financial future by providing a payout if something happens to you during the policy term. This payout can help them deal with expenses such as loan repayments or maintaining their current lifestyle—without having to worry about money issues.
But there’s more to it than just protection. The investment component plays a key role in ULIP benefits, allowing you to grow your money over time. When you pay the ULIP premium, part of it goes toward the life cover, and the rest is invested in different funds. You get to pick the fund based on your goals and how comfortable you are with risk. Plus, if your priorities shift, you can switch funds later—keeping your investment strategy flexible and aligned with your changing needs.
Key Benefits of Investing in ULIPs
Who Should Invest in ULIPs?
1. Looking for a Single Plan
If you want life cover and market-linked investments all in one package, a ULIP might be the right pick. It bundles protection and growth potential under a single policy.
2. Comfortable with Market Fluctuations
ULIPs channel investments into financial markets, so returns can vary. If you understand and can handle these ups and downs, ULIPs may suit your investment style.
3. Hands-On Investors
ULIPs let you switch between different funds. If you enjoy adjusting your portfolio as your goals or risk tolerance change, you’ll appreciate this flexibility.
4. Long-Term Planners
A ULIP comes with a mandatory five-year lock-in period, making it a better fit if you’re aiming for bigger, long-term milestones. Being patient and staying invested can help you make the most of your plan.
If you’re chasing quick gains or want zero lock-in requirements, ULIPs might not align with your needs. Like any investment decision, it’s about finding the option that clicks with your financial goals and comfort level.
Determining if a ULIP is the Right Investment Option
Determining if a Unit-Linked Insurance Plan (ULIP) is the right choice can feel like a big decision—especially when there are plenty of investment options to pick from. Let us compare ULIPs with other avenues and discover how ULIP benefits might align with your unique financial goals, helping you see if it’s truly the right fit.
A. ULIPs vs. Traditional Insurance Policies
While other life insurance policies (except term insurance) also offer an investment component that can offer you monetary returns, ULIPs allow you to be more hands-on with your investment. You can choose which fund to invest in and switch between funds as your goals and risk appetite change.
B. Comparing ULIPs with Fixed Deposits
Fixed deposits just give a fixed return on your investment. While generally, ULIP returns aren’t guaranteed, there’s a potential for achieving great returns on your investment. Further, you also get a life cover component with ULIPs.
C. ULIPs vs. Mutual Funds
Both are great financial products for growing your money, but generally, the monetary returns in mutual funds could be higher, as their purpose is purely investment, whereas ULIPs offer both financial protection for your family as well as an option to grow your money.
Key Considerations When Choosing a ULIP
If you’re interested in getting a ULIP, that’s great, but to choose the right ULIP for yourself, keep these things in mind:
1. Know your financial goals; whether it is buying your dream house or your child’s wedding, knowing your goal will allow you to choose the right investment fund.
2. Understand what life cover will be adequate for your family in your absence. You do not want to leave them with an inadequate cover.
3. Know how much risk you can take and consider your age, salary, and financial commitments while deciding this so that you don’t end up taking risks that you cannot handle.
4. Compare charges and fees across ULIPs, as they can impact your maturity returns.
5. Study the different fund options offered by your ULIP and pick the one that suits your risk appetite. For example, if you are someone who is looking for high returns and is okay with handling a high amount of risk, you may want to choose the equity fund.
6. Check for free fund switches, as they can offer you better flexibility.
7. Check what riders you can add to your ULIP. Riders offer additional coverage over and above what the base ULIP covers.
8. Select an insurer who has a high claim settlement ratio (97% or above), a within-1-day claim processing time, and whose brand name is something that you can trust.
ULIPs can be a great way to secure your family’s financial future while investing toward your long-term goals. They offer two major ULIP benefits: insurance coverage and market-linked growth within a single plan. However, it’s crucial to understand how ULIPs operate and compare them with other investment avenues to ensure you’re making the right choice. By weighing their pros and cons alongside your personal objectives, you’ll be better equipped to pick an investment strategy that truly aligns with your financial aspirations.
Tax Disclaimer: Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions and tax Laws are subject to change from time to time. You are requested to seek tax advice from Chartered Accountant or personal tax advisor with respect to personal tax liabilities under the Income-Tax law
© 2021 KlarifyLife. All rights reserved.
1800-268-0890
