ULIP is a type of insurance product that gives you the benefit of protection and returns on investment. Read on to know more about how to make the most of your ULIP plan.
Unit Linked Insurance Plan or ULIP is a type of insurance policy that allows you to grow your wealth while at the same time offering you the security of insurance protection. In ULIP you have the flexibility to pay the premium either monthly or annually. When you pay the premium a small portion of the amount will go towards offering the life cover while the remaining amount is invested in mutual funds of your choice and generates returns.
Typically, the ULIP plan comes with a lock-in period of five years, which means the amount you invest in the plan cannot be withdrawn before five years. However, if you must withdraw before the term, you can withdraw partially subject to payment of the partial withdrawal fees. Also, you have the option to surrender the policy.
Most insurers allow you the option to invest your funds in different fund options. And, based on your risk-taking capacity and financial goal, you can invest the funds in equity funds, debt funds or balanced funds. When you invest in equity funds, you essentially invest in buying shares of the companies, whereas in debt funds, you invest in debt instruments. The balanced funds allow you to invest in both equity and debt funds in equal shares.
If your objective is to maximise returns and are willing to take risk, you can adopt an aggressive investment strategy and invest in equity-oriented funds options. However, if you are looking for low-risk investment opportunities, you can invest in debt fund options. The returns you get from mutual fund investments greatly depends on the fund you choose, and the market condition.
If you have invested in ULIP or wish to invest in one, you must be keen to look for ways to maximise the returns. So, to help you get maximum benefit, we list down a few useful tips.
- To get maximum returns from the ULIP plan, you can leverage the switch fund option to your advantage. This facility allows you to redirect the premium allocation from one fund to another based on the market movement. For example, if you have invested a large portion of the funds in debt funds, you can switch the funds to equity funds and vice-versa. You can use the fund option for free 2-3 times in a year without incurring any fees and make the most of the market condition.
- The Unit-Linked Investment Plan comes with a lock-in period of five years, which means it is essentially a long-term investment plan. If you have invested in a ULIP for 10 years or more, you can benefit from the power of compounding, which means you get additional returns on the returns generated in the previous year.
- When you invest in a ULIP plan, you have the flexibility to choose between different fund options; you can invest in debt funds or equity funds. The debt funds are low-risk investment options and therefore the returns are comparatively lower and stable than equity funds. If you choose to invest in equity mutual funds or other equity-oriented fund options, you can expect to gain higher returns than debt funds, however the risk in such are also higher.
- Another effective way to maximise the returns on your investment in ULIP is to be consistent with your investment in the plan over a long period.
Now that you are aware of the different ways to grow your wealth, make the most of these tips and get maximum benefit from investment in ULIP.