ULIPs: Is it Best for Achieving Long Term Financial Goals?

The dwindling increase in expenses added with  high inflation rates has forced the investors to find ways of investment which helps them to maximize returns on their invested money.

The normal sort of investment tools just like the fixed deposits (FD) are giving a meagre rate of interest and the one like public provident funds (PPF) which has longer maturity period. Most of the investors in today’s era search for smart yet higher returns on their funds, within short to medium tenure.

Saving your income from tax also has be borne in mind while making an investment decision as this may assist you to spice up your income and helps you to realize your required investment goal.

The Unit Linked Insurance Plans (ULIPs) comes in handy for investors over other sorts of investment as they’re going to be invested available markets through a mixture of equity, growth and balanced schemes.

Let’s take a sneak peek on how it works and the way it helps investors to realize future financial goals.

What is ULIPs

  • A ULIP, the complete sort of ULIP may be a unit-linked insurance plan. it’s a sort of investment tool which provides for insurance payout benefits.
  • It’s one among the most popular sorts of investment instruments in India which may be used as a tax savings instrument as well as for coverage . 
  • It provides dual benefits – protection and wealth creation.
  • An investor can choose funds under a ULIP plan supported their financial goals for the future and accordingly allocate money in equity and or debt funds respectively. 
  • Investors will receive the advantage of life coverage throughout policy by investing in ULIPs. If one is searching for an extended term goal be it children’s education or retirement planning or for house construction or purchase of a replacement car then on one can choose ULIPs because it offers best returns on future investment.

How do ULIPs work?

 Once you begin investing in ULIP, the insurance provider will invest some part of the premium amount in equities or debts then after the balance amount is going to be utilized to supply insurance cover to the investor. The fund managers in insurance companies will handle the investments and hence investor need not to worry about tracking their investments.

 The ULIPs provides a chance for its holders change between equity and debt-based investments (based on your risk-taking ability). Benefits of switching will boost the recognition of those investment instruments.Kindly Note: There’ll be switching charges which an insurer will levy on investors for switching and some insurers may offer it for free of charge .

Lock-in Period of ULIP 

The Insurance Regulatory and Development Authority of India (IRDAI) during 2010 increased the lock-in period of ULIPs to five years from 3 years. The mantra which holds good for insurance policies applies to unit-linked insurance plans also , the longer you hold the policy higher the yield it fetches. ULIPs fetches better returns if held for a extended period and hence it’s better to carry it for the whole tenure of the policy which ranges between 10 – 15 years.