A ULIP policy, or a Unit Linked Insurance Plan, combines investment products that offer life coverage with additional market-linked benefits. ULIP funds are accepted widely and come with additional liquidity, flexibility, tax benefits, mitigated risks, transparency, and so on.
ULIP plans in India also provide death benefits to the nominees of the policyholder in case of the latter’s unfortunate death in an accident. So if you are thinking about investing in a ULIP policy, you must be aware of the nitty-gritties of these investment options in the country.
ULIPs offer unmatched flexibility when it comes to financial investments. Also, the policyholders get the option of investing in bonds, stocks, and mutual funds. However, you must invest in a ULIP policy according to your risk sensitivity. But before proceeding with your ULIP investment, you must be aware of the different ULIP fund options.
This blog will talk about the different ULIP funds to help you choose your investment options better. Let’s get started.
Different ULIP Fund Options for Investors in India
The best part about ULIP policies is that the investor can choose different ULIP funds. Depending on your risk-mitigating capabilities, you can pick mutual funds, stocks, and bonds for investments. Also, you will have the option to switch between funds which makes it a very popular financial instrument in India.
Certain reputed insurers in India, like Tata AIA, offer some amazing ULIP plans in India. For instance, the Tata AIA life insurance offers a ULIP plan with different fund options. If you opt for such ULIP plans for yourself, you can select from different fund options according to your needs and risk-taking capacity.
Some ULIP funds options are listed below –
- Equity funds
These are primarily meant for investment in corporate stocks. Hence, investing in equity funds is riskier than the rest. This is because stocks are subject to market risk, and hence, one should be sure about a company before investing in its stocks.
On the other hand, equity funds offer high returns when the market is bullish. For beginners, equity funds are not a recommended option for investments because it requires close market monitoring to understand the fund performance.
- Cash or liquid funds
Cash ULIP funds are low-risk investments with low but safe returns. These are also often termed liquid funds. Here, the cash is invested in mutual funds, and hence, the investors can expect steady returns from the same. Therefore, if you are looking for a safe investment option and not a pro in market-linked investments, this is the best ULIP funds option for you.
- Fixed Income Funds
This option includes secured and unsecured investments of different proportions as per the investors’ requirements. These are also termed fixed interest ULIP funds, where the investment is generally made in debt funds, government bonds & securities, corporate bonds, etc. This investment generates fixed income for the investors and offers an average return on investment. Also, fixed-income funds are riskier than cash funds.
- Balanced ULIP Funds
Balanced funds are collective funds where the high return-high risk funds are combined with low return-fixed interest funds. These funds make guaranteed returns and also mitigate the market-linked risks. Balanced funds are, therefore, medium-risk investment options in ULIP.
Things to Consider When Choosing a ULIP Policy
Now that you know the ULIP fund options, you need to know the tricks of choosing the right ULIP policy for yourself. Consider these points when looking for ULIPs for investment –
- First, you need to compare the different ULIP plans that the different insurance companies in India offer. The more you do the research, the better chances you get hold of the right one.
- You also need to gauge the ULIP fund performance to ensure you invest in the right option. The chosen ULIP funds should be flexible enough to let you switch between options. Also, you should be able to select the right coverage, rider plans, and premium amount.
- Finally, your personal investment goals should align with your ULIP policy purchase. You need to be sure of what you will do with the sum insured. Is it for your kid’s education, your retirement financial goals, or a world tour that you have planned with your spouse? You need to be sure of your goal before investing.
The purpose of ULIP investments is to grow your money under the right conditions to meet your future financial goals and to provide you life cover. So, the earlier you start investing in ULIPs, your chance to build a huge corpus is better. However, as discussed above, do not skip your research when choosing a comprehensive life insurance plan. This will save you from falling prey to a bad investment.