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Things to keep in mind before investing in a ULIP

Things to keep in mind before investing in a ULIP


When you start earning, you would want your wealth to grow, mostly because you want to accomplish different goals at different life stages. While you may have different options at your disposal, some investment options can be risky at times. Instead, a plan which is quite popular these days that you can opt for in terms of investment is ULIP plan.

If you are considering investing in ULIPs, there are a few things you should be aware of. Many people do not consider understanding the basics of this plan before investing in it. Read on to know what things you should keep in your mind when investing in ULIPs.

What is ULIP?

A ULIP is a life insurance plan that provides you with the dual benefits of investment and insurance in the same plan. The premium you pay towards the plan is used for both components. In the investment component, you get to invest in 3 types of funds: equity, debt, and balanced, which is a mix of equity and debt funds. Equity and debt funds have different risk factors and different rates of return.

In the insurance component, you get a life cover to get financial coverage against unfortunate circumstances. If you were to pass away during the term of the plan, your loved ones will be compensated with a death benefit. This amount can be used by your family to take care of vital expenses. Along with the death benefit, they also get the maturity benefits from the policy.

What should you know about ULIPs?

There are different aspects that you should familiarise yourself with when it comes to ULIP meaning, to get a better understanding of it before you invest in it:

1.    Duration of the plan

People investing in ULIPs to gain good returns is probably one of the reasons for their popularity. These returns can help them accomplish their life goals. Life goals such as wanting to buy or build a dream home, planning a trip abroad, or saving for medical emergencies require sufficient capital. While these goals can be short-term goals, there are also long-term goals. These goals could be planning for your child’s education or marriage or wanting to have a financially secure retirement. Keep in mind that staying invested in ULIPs for a longer duration can provide you with greater returns compared to a shorter duration. However, if you are looking for a short-term investment period, you have the option of doing so.


2.    The premium of the plan

The premiums paid towards the plan lets you take advantage of the dual benefits of investment and insurance. Investing in ULIPs at a young age allows you to save money with lower premiums. If you were to opt for ULIPs at a later stage, the premiums would be higher. In ULIPs, you can either do monthly or yearly premium payments, offering flexibility to those who have multiple expenses to take care of. You may be able to do a one-time lump-sum payment as well if your income allows you to. The duration of the policy can impact the premium of your plan. A long-duration plan may have affordable premiums compared to a short-duration plan.

3.    Charges related to the plan

There are different charges that are levied in ULIPs. These charges include fund management charge, administration charge and switching charge. Most of these charges are deducted from your premiums directly, and they do not have a severe impact on your returns.

4.    Funds

In ULIPs, you can invest in different types of funds. These funds include equity funds and debt funds. There are other sub-types of funds such as liquid funds and cash markets which also can be opted by you. Each type has a different risk factor and offers variating returns. Based on what your risk appetite is and what your requirements are, choose the fund accordingly.


When looking to invest in ULIPs, keep these things in mind to have a clear idea without any misunderstanding. Use the ULIP return calculator to see how much your returns would be based on your investments.


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