Investing In ULIPs? Consider These Important Questions First

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Life insurance industry has come a long way from when it started. The increasing consumer expectations and rising awareness have brought about a revolution in this sector. Previously, life insurance policies were considered rigid with a long-term perspective. However, due to the innovations in the life insurance sector, we have ULIP plans. 

If your next question is what is ULIP, then know that it is a plan that offers the much-needed flexibility and also a shorter tenure investment opportunity. Even ULIP plans have gone through changes and are still going through them. The insurance companies in our country want to ensure that they are neck-to-neck with the changing demands of the consumers and that they are being able to suffice to the growing needs. 

Additionally, to get the best ULIP plan, it is essential that you research well. Today, even the best ULIP plans available provide many benefits. And as an investor, you can stand a chance to reap these benefits and be gratified with your choices. 

Although investing in any ULIP plan is wise and beneficial, there are some specific things that you should know. Like it will help you make the right decisions if you know the answers to the following questions: 

  • Does the Plan Suit Your Needs?

Primarily, the first and foremost question you should ask is this one. It will be beneficial to know if the ULIP plan suits your financial goals or not before you start finding the best ULIP plan. 

Although ULIP plans provide flexibility in the form of partial withdrawals, these can be done only after five years. Plus, it will help if you hold the plan for a longer tenure. In this manner, you can achieve higher returns. Thus, it would be smart to measure the policy against your financial requirements before you buy. 

  • What Coverage is Available? 

While understanding what is ULIP, you will get to know that the determination of the sum assured depends on the amount of premium paid. Under ULIP plans, the premium coverage is expressed as a multiple of the annual premium or single premium paid. 

This allowed multiple varies from plan to plan. So, you should assess the coverage available in the plan under consideration. You can use the ULIP calculator available on the insurer’s websites to compare the plans to find the best ULIP plan. 

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  • What are Your Flexibility Concerns?

Best ULIP plans find favour with investors due to the flexibility they have to offer. Beginning from switching, partial withdrawals, premium redirection, top-up facility, and other such factors ensure that the plan provides ample scope of flexibility. 

Most plans offer this flexibility, but they too are subject to come conditions. There can be a cap on the frequency of free switches, a limit to free partial withdrawals and others. Hence, it will be better to read the policy documents with utmost care to determine the limits of the plan you are considering buying.

  • What Kind of Returns is Available?

A good ULIP policy provides returns by virtue of diversification. When you go through some of the plans, you will find that the plan’s funds have a diversified portfolio comprising of multiple companies. 

And as ULIP plans are subject to market risks, it is essential to check the historical returns generated by the funds so far. Doing so may not give an accurate answer, but it will provide you with an estimate of the trends generated and expected. Plus, it will also help you in analyzing your risk profile. If you are a risk-taker, you can check plans from that perspective. 

  • What are the Plan Charges?

A few years back, the ULIP plans had colossal charges deducted from the premium, which resulted in low yields. However, after the SEBI regulations and the changes made, ULIP’s now have a low charge structure which maximizes returns. 

These charges under ULIP plans are in the form of premium allocation, fund management, mortality, administrative costs, and others. Many ULIP plans do not levy the premium allocation charge. So, it will be beneficial to study the plans’ charge structure and find the one with the lowest costs. 

  • What Other Benefits are Offered?

In the present day, insurance companies are increasingly providing the features of guaranteed additions and loyalty additions. These add a fixed percentage of returns to the existing fund at specific intervals.

With more and more ULIP plans promising these benefits, you should check to make sure that the plan you choose offers these benefits. 

These few questions generally cover all the queries you may have when planning to buy a ULIP plan. Keep in mind not to buy a ULIP plan solely based on the plan’s promotional campaign or at the behest of your agent. 

You can check the plans online and choose the one most suitable for you. Otherwise, you can check the ULIP plans offered by trustworthy insurance companies. They have comprehensive plans that will make your buying decision easy. If you have queries, you can contact their team of experts!