6 Steps to Choose Your Preferred ULIP in India

6 Steps to Choose Your Preferred ULIP in India

Everyone works hard to earn a daily living. With the economy slowing down and millions of people losing their source of livelihood due to the current Coronavirus (COVID-19) pandemic, it is crucial to safeguard the future with savings. Financial distress can happen anytime, and you should have a sound investment strategy to help you sail smoothly during the turbulence.

Unit-Linked Insurance Plans (ULIPs) are one of the most sought-after and preferred investment instruments in the market at present. This is because ULIP is the only  insurance plan that can insure your life and help you build a respectable corpus over a long tenure. If you are asking yourself “why should I invest in ULIP”, then you should know that it is a highly profitable investment option. It gives you the opportunity to invest in equity or debt funds as per your risk appetite.

Additionally, if you are a working professional, you can avail of ULIP tax benefits by investing in this product. The premium that you pay for the ULIP is tax-deductible up to INR 1.5 lakh per year as per Section 80C of the Income Tax Act, 1961. Moreover, the ULIP tax benefits are applicable to the maturity and death benefits as well. The amount that you receive on maturity or your nominees receive in case of any untoward incident is tax-free according to Section 10 (10D) of the Act.

Based on your investment objective and plan, you can choose from a plethora of ULIPs. It would be best if you select the right ULIP to earn lucrative returns over time. Here are six steps that you can follow to opt for an ideal ULIP plan.

  • Pick a ULIP that has varied asset classes

ULIP invests in a wide range of asset classes, which helps in minimizing the risk. A healthy mix of equity and debt will give you attractive returns as well as secure your savings. Varying options means you have a balanced portfolio, and you should choose a ULIP plan that offers this.

  • Invest in ULP that has a simple buying process

Investing in any financial product these days has become relatively quick and straightforward. Do your research well and ask your financial advisor about the best ULIP according to your life goals and risk appetite. Once decided, buy the ULIP plan that suits your needs.

  • Understand the various charges

ULIP plans are associated with numerous charges. Therefore, it is advisable to learn about these expenses before purchasing a plan. Some costs related to ULIP include fund management charge, premium allocation charge, policy administration charge, surrender charge, policy administration charge, and mortality charge. Though the charges are enormous, ULIP offers superior returns as compared to other financial instruments in the long run.

  • Go for a flexible duration

Always look for ULIP that offers flexibility in terms of tenure. A ULIP that provides a time- frame of five to 20 years may be better than the one that comes with a period of 10 to 20 years.

  • Look for convenient premium payment alternatives

The flexibility of payments is crucial while buying ULIP. ULIPs offer a single premium payment method or regular premium payment plans, which you can select based on the flow of your income. The single premium payment allows you to pay the total premium in one go. In a regular premium payment policy, you need to pay the premium until the policy’s period. In the case of a limited premium payment alternative, you have to pay the premium for a particular tenure, like five years or seven years, depending on your agreement with the insurer.

  • Ensure your nominees get a high death benefit

In ULIPs, the death benefit that your nominees will receive will be either the fund value or sum assured, whichever amount is higher. Some plans also offer 105% of the premiums paid as a death benefit.

Following these steps will ensure that you avail of an appropriate ULIP as per your monetary aspirations and risk-taking ability.


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