Are you interested in investing in Unit Linked Insurance Plans? But you’re confused about the pointers to consider while buying a ULIP? Well, it is a unique scheme offering the advantages of both investment and life insurance. Based on your requirements and funds, you can choose the plan, pick the right life coverage, and invest in the market. The five parameters needed to be considered while purchasing the plan are described here. After knowing the requirements, you can go ahead and opt for the scheme.
Types of ULIPs
Based on your long-term financial objectives, you have to pick any of the following ULIPs. Also, it depends on the type of investments you wish to make. The types available are:
- Child ULIP plans.
- ULIP Pension plans.
- ULIP for medical requirements.
- ULIPs long-term wealth creation.
The plans are better compared to others as they give a lifecycle-based portfolio strategy.
Insurer’s credibility
Before you proceed and invest in the coverage, you must check the insurer’s credibility without fail. It is a long-term investment, so you must verify if they will offer you enough buffers when there is any liability or threat. Also, on your behalf, it is the insurance company who will invest the money in the market. So, you must check their previous records and what their customers have to say about them. It will help you decide if you should purchase a ULIP plan from them. Visit the company’s review section to find if it has positive or negative reviews.
Go for the maximum sum assured.
The sum assured to be given to the nominee mentioned by the policyholder upon his or her premature death. The amount to be paid is decided when you purchase the Unit Linked Insurance Plan. So it is vital to opt for the maximum sum assured as you can use the amount to meet the daily needs of your loved ones. It is better to ask your service provider to give an idea of the potential premium amount and the fund to be gathered via the investment.
Check out the charges.
Do not neglect the charges associated with the insurance provider, as everyone has a different fee structure for ULIPs. Some charges that can be common with most insurance providers are premium allocation, switching, rider, mortality, policy administration, premium discontinuance, top-up charges, etc. Every company will levy the charges; however, the amount will vary from one another. Before approaching anyone, it is better to perform some research work and check if it fits your investment goals
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Checking the risk closely
A part of your insurance premium under ULIP is invested into the market. It is a high-risk fund, so you get higher funds, and many investors invest in it blindly. But there can be some risks, so you must pay attention before investing. Also, you can ask your insurance provider to assist you in making the right decision when opting for the scheme. The kind of funds that can direct you on the investment are:
- Deft funds: It involves directing investments of ULIP to mutual funds, and the benefit is it can be reaped at a lower risk.
- Equity funds: It involves investments in bonds, stocks, equity security, and the risk is high.
- Balanced funds: It directs your investments in a combination of debts and equity funds, where the risk is moderate.
More parameters
The above parameters are the crucial ones, but apart from that, some more are there, which you cannot ignore. They also play a crucial role while investing in Unit Linked Insurance Plan.
The process of the scheme
The process is another aspect, and a customer may not always be aware of the investment strategy. The stock selection and portfolio construction need to be followed, which a fund manager can explain to you better. Nonetheless, before approaching any company, you must check their investment history and orientation. A long-term plan indicates the professionals will manage investments and portfolios considering the life goals of customers. A short-term plan indicates they tend to take additional risks.
Maximum drawdown
Ensure to pay attention to the downside capture and maximum drawdown ratio to find if the fund can safeguard you from the downside risk. You must remember to make up 150% return and 60% loss while investing. Another parameter to consider while deciding whether to buy a plan is the rolling returns the funds will give you.
Final thoughts
Well, these are the pointers one must keep in consideration while purchasing ULIP. It will give a clearer picture of which plan would be the best for you. The suitable one can offer flexibility to pick between investments, change the life cover, getting more riders on a plan, and many more things. Thus, it’s time to opt for the plan fulfilling your requirements.
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