ULIP: Insurance and investment in one

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As a potential investor, you can find various financial instruments that provide you with the opportunity of investing and getting good returns. However, many investors make the mistake of investing all their money in one go. These risky moves can cause a financial burden on you, especially when you could end up losing your investments and gain zero returns. However, with a ULIP, you get the benefit of investment and insurance in a single policy. Read more if you want to understand how this one policy withtwo benefits can help you in the long run.

What is ULIP?

ULIP is a life insurance policy which gives the policyholder the dual benefit of investment and insurance under one policy. These benefits are provided by dividing the premium paid for the policy. One part is used for the provision of life cover to financially protect your loved ones. The other part is used for investments. Investment in ULIPs is made in equity and debt funds. Equity fund has a higher risk factor and offers high returns, whereas debt fund has a low risk factor and offers low to medium returns. These investments are made as per your risk appetite.

What is the benefit of ULIPs?

Investment and insurance are not just the only benefits that you can enjoy with ULIPs. There are other benefits such as:

1.Duration to match your needs

When you are planning on investing in ULIPs, the duration of the policy will most likely be one of the first questions to come to your mind. For how long one wants to invest in ULIPs depends on the individual. If you want to invest for 5 years, you have the option of a taking 5-year long ULIP policy. Similarly, you can invest for 10 or 15 years as well, depending on your life goals and how much you are willing to invest.

2. Variety of funds

When you opt to invest in ULIPs, you are presented with different types of funds to select from for your investment. If you want higher returns quickly, you can choose to invest in equity funds. However, these funds carry a high-risk factor, as market fluctuations can affect the returns you would gain on your investment. On the other hand, you have the option of investing in debt funds. In such funds, the money is invested in securities with fixed income, which, when compared to stocks, are less affected by market fluctuations and give steady returns. You also have the option of going with a bit of both, so that you can maximise the returns.

3. Insurance for loved ones

While financial gain is the main selling point of ULIPs, the policy also offers life cover to the policyholder and their family. The life cover begins from day one itself. If the policyholder were to pass away due to some unfortunate circumstances, the kin of the policyholder will be given either the sum assured or the fund value, whichever is higher at the time of demise of the policyholder. This life cover can be used to take care of vital expenses by the kin.

4. Achieving life goals

For every individual, a life goal can range from starting their own business to buying a bigger house for their family. Based on the life goals, you, as a policyholder, can invest the amount that you feel will help in achieving your life goal. To get a basic idea about how much you should invest in the ULIP policy, you can use the ULIP return calculator on the website of your preferred insurer. When you start investing early, the maturity benefits of the plan will be greater. At any point of time, you have the option of increasing the amount you wish to invest with the help of a top-up premium. You can also choose to decrease the amount you are investing in the policy.

These benefits make ULIPs the ideal financial instrument for people who are looking for investment and insurance in a single policy. To know more the policy, such as  ULIP charges and other benefits, get in touch with your insurance advisor.

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