How to Choose The Right ULIP Plan In 5 Easy Steps

What are ULIPs?

ULIPs are a mix of investment and insurance. A ULIP enables plan holders to attain their objective of wealth creation through investing in equity funds or debt-based funds or both by their long-term goals. One of the popular investment tool, ULIPs help you achieve your life goals with systematic investments.

Key Features of ULIP

Let us look at the key features of ULIPs to have a better understanding

There are several Unit Linked Insurance Plans in India. It is important to choose the right plan that suits your needs and requirements so that you gain maximum profit in the future.

Here are 5 easy steps that can help you choose the right Unit Linked Insurance Plan

1. Check The Life Protection Cover

   Unit Linked Insurance Plan is a combination of investment and insurance. Sometimes, while considering the investment return part, insurance coverage is neglected.

   While purchasing a ULIP policy it is important to make sure that the sum assured covers enough to protect your family at the time of financial crisis even if you are not there to look after them. Hence, life protection cover plays an important part as the investment coverage when it comes to Unit Linked Insurance Plans.

2. Choose The Plan with Higher Fund Option

   The primary focus while purchasing a ULIP policy is to make sure that it offers diverse fund options to the insured. A limited number of market-related funds seize the chances of better ULIP performance.

   While investing in ULIPs, one can choose between debt funds, equity funds, or a mix of both according to their requirements. Equity funds, on one hand, offer higher growth potential for the long term, Debt funds on the other hand helps you save your wealth.

   You need to keep a balance between these funds as per your requirements.

3. Select a Plan Based On Your Personal Investment Goals

   As an investor, if you want to meet your desired financial goals in the future, it is important to make smart investment decisions at the present. Be it your post-retirement life, your child’s future education, your dream goals, your family’s future, or any other future financial requirements, it is important to outline your personal investment goals carefully.

   Once you identify your future financial needs it becomes easy to choose the right Unit Linked Investment Plan that matches your life goals.

   

4. Know Your Risk-Taking Appetite

   Risk-taking appetite is an essential factor not just while buying a policy but in general life as well. When it comes to purchasing a Unit Linked Insurance Plan,

   • Equity funds are associated with higher risks while
   • Debt funds are associated with lower risk compared to Equity funds

   The main factors determining your risk-taking appetite are:

   • Age
   • Income
   • Financial corpus
   • Several dependents, etc.

   Being aware of your condition keeping in mind the abovementioned factors will help in making a better decision while choosing the right ULIP plan.

5. Check ULIP Policy Charges

   In Unit Linked Insurance Plan (ULIP), the entire amount is paid as a premium, and nothing is used to purchase units. The insurance company, as per their policies, deducts certain charges before allotting their units. The remaining premium amount is allocated in different asset classes such as debt, equity, or both.

   Even though the charges against ULIPs may vary from company to company, the standard charges that you have to look out for, include the following:

   • Fund Management Charges
   • Premium Allocation Charges
   • Policy Administration Charges
   • Surrender or Discontinuance Charges
   • Partial Withdrawal Charges
   • Mortality Charges
   • Switching Charges
   • Guarantee Charges
   • Rider Charges