Investing in ULIPs? Know These 4 Useful Features of a ULIP Beforehand


ULIP is one of the most sought after investment instruments for Indian investors. ULIP, also known as Unit Linked Insurance Plan, is an insurance and investment product that not only gives your family the financial protection of a life cover but also gives you an option to grow your wealth while you stay invested.

When you invest in the best ULIP plans, you have the opportunity to invest in various funds based on your risk appetite. Under this plan, the life cover and investment option get managed as per your life insurance needs and risk tolerance.

However, before you invest in a ULIP, you need to understand that it is subject to market risks. Therefore, you need to educate yourself about the policy benefits and features before you commit to it for the long term.

Buying ULIP Online

As is with everything these days, you can buy your investment products online too. Reliable insurance providers offer you comparison tools that are designed to help first-time investors to choose the right insurance product after making a careful evaluation.

It is, therefore, advisable to first understand what is ULIP as well as compare different types of ULIPs for their features, terms and conditions, and risk factor. After doing this exercise, you will be able to find a plan that matches your portfolio and investment needs by giving you desired return on your investment.

ULIP Features To Keep In Mind

Here are some of the features of ULIP that make it a must-have in an investment portfolio:

  1. Life Cover And Investment

They not only give your loved ones much-needed financial security but also enables you to earn market-linked returns over the long term.

  1. EEE Advantage

They are one of the best tax-saving investments because of their exempt-exempt-exempt (EEE) advantage. This means that you are eligible for tax exemption from the investment to maturity stage.

  1. Flexibility

With ULIP, you have the option to choose the funds as per your risk appetite. You can either invest in equity funds or debt funds. For moderate risk, you can choose balanced funds. You also have the flexibility to switch between fund options according to prevailing market conditions.

  1. Long Term Investment

When you invest in ULIP, you have to stay invested for at least 15-20 years to be able to get good returns. This helps you develop a saving habit and also lead to wealth creation in the process.

Tips To Choose The Right ULIP

When you are looking for the best ULIP plan to add to your portfolio, you need to make sure that it gives you suitable returns. ULIPs offer a wide range of benefits, and one of them is the number of investment options if chosen the right way.

ULIP is like just another insurance policy where you have to pay the premium regularly for the entire policy duration. A part of that premium will be invested towards your life cover, and the other part will be invested in market-linked instruments that will help you generate good returns.

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As an investor, you have the option to choose the coverage amount that will protect your family against lifes eventualities, such as the sudden demise of the policyholder. Additionally, investors also have the opportunity to earn handsome returns by investing in market-linked investments, thereby allowing you to grow your wealth.

  • Investment Based On Risk Capacity

Another important component of ULIP is to know your risk-taking capacity. Knowing about your risk tolerance will help you make the right investment decision when it comes to choosing the fund options. If you have the capacity to take higher risks, then consider investing in equity funds.

When done the right way, the fund value can help you meet your long term life goals. While buying a ULIP plan, you should also check if the insurance provider allows you to make free switches between fund options. This is a crucial factor in choosing the insurer as the freedom to switch funds will help you cope with the market unpredictability.

  • Investment Based On Life Goals

If you want to meet your life goals, you need to make smart investment decisions. Your life goal can be anything from funding your childs education to buying a new house. Irrespective of your goals, it is necessary to choose the right investment vehicle to ensure that your goals will be fulfilled at their designated time.

For example, if you want to have a corpus of funds to pay for a new house down the line, a ULIP plan can be a good start as you would have to stay invested for at least five years for your plan to give you good returns.

Understand the risks and benefits of ULIPs before investing. This article is a good starting point to learn the basics and guidelines about ULIP and how it expands your investment portfolio.