Investing could be a complicated business. Especially in the present financial market, which is replete with complicated financial products. Unit Linked Insurance Plans (ULIPs) easily fit into the category of such complicated financial investments. However, it is just too unique and beneficial proposition to be left out of your investment portfolio.
ULIP funds in India, offer unique benefits and an expense ratio which competes for the neck to neck with any mutual fund investment. However, there is one significant difference that separates ULIPs from any other investment product.
How are ULIPs Different?
ULIPplansservea dual purpose,i.e.provides investors with a life insurance coverage and allows them to save towards specific wealth goals. Investors can even make strategic investment decisions, depending on the market-specific growth demands.
Though, life insurance is not the only unique aspect of ULIP investments. The following features also put ULIPs a tad apart from other investments:
- Flexibility to chose asset class without compromising on benefits
- Option to switch asset classes in between the term
- Automatic investment option if insured dies; i.e. the plan will continue till maturity as if the investor is alive and all premiums are being paid, with the final fund value going to the nominee
ULIPs offer three asset classes to investors – equity, debt and liquid funds. All three assets classes offer different risk-return figures. You can divide your investments among all three or stick to any one of these funds.Your benefits in the plan will remain unaffected, regardless of your choice of the asset.
You can even switch from one type of asset class to the other midway. Any such switch where you want to switch from an equity fund to a debt fund or vice versa will change your taxability status on these investments. However, no such conditions apply in ULIPs.
Why is Choosing ULIP the Best Possible Option?
At present, we are living in a world of ULIPs which offers the best of both worlds to the concerned individuals. Be it the much-anticipated saving tool or a specifically addressed protection plan working long-term; a ULIP comes with a host of possibilities for the concerned individual.
However, unlike other insurance schemes, ULIPs focus more on wealth generation over long-term investments. To be precise, most ULIPs promise a reasonable sum assured and good investment value.
Benefits of Choosing New ULIPs
Although ULIP plans have been around for long, the new additions come with several innovative and utilitarian feature sets. Firstly, new ULIP plans offer better wealth creating avenues for users while taking care of the insurance coverage. The revamped cost structure is easy to take care of, and the marketing strategies associated with them have also improved immensely.
Therefore, it is always advisable to compare the existing ULIPs for getting hold of the best investment strategies. That said, a user needs to look at these 4important factors before zeroing in on the most suitable ULIP:
#1. Analyzing the Customizability Quotient
A functional ULIP plan must not come across as a rigid insurance scheme, but it should be able to customize the offerings, according to the customer preferences. There are times when the life-insurance aspect of a ULIP changes according to income, age, and other existing dependents.
Although the minimum life-cover remains constant, the existing plan must offer unparalleled flexibility, in terms of premium, payment terms, payment frequency, sum assured and even the rider addition. Therefore, one should always compare ULIP plans by checking the customizability quotient.
#2. Cost-Effective ULIPs
Another factor that needs to be taken into account is the cost-effective nature of the ULIP. This aspect entails to the fund performance and maturity payout. Customers comparing these insurance plans must be able to analyze these factors before taking the call.
Newer ULIP plans have charges capped atop the existing plans which in turn make it easier for the concerned individuals to get their hands-on better returns. Drawing comparisons is a great attribute as an individual can easily get hold of a cheaper and the best-suited plan to work with.
Additionally, comparing ULIP plans also allow users to opt for cost-effective premature exit plans as the existing penalties aren’t as painful as before. However, it is always advisable to continue until the policy matures, in order to reap the benefits of the compounding effect and existing bonuses.
#3. ULIP Transparency
Comparing ULIPs is important, precisely for taking the aspect of transparency into account. Be it the disclosed website or the existing product brochures; it is advisable to opt for a service provider that enlists every offering, well-in-advance.
Companies that abide by the IRDA guidelines are best suited for the job. In the end, it all comes down to the policy disclosure and how it can impact the common user. With hundreds of products to choose from, the best ULIP is the one that has every aspect segregated in the simplest possible manner.
#4. Claim Settlement
Before selecting a ULIP plan, it is essential to conduct extensive researches and compare multiple entities for identifying the best option in hand. One major factor must be the ease of claim settlement as nobody wants to get hands on something less rewarding. Therefore, ULIP comparisons must be conducted with the Claim Settlement Ratio at the hindsight.
With marketing volatility being an impending factor, it is only appropriate that customers are increasingly considering ULIPs as the preferred investment options. With the money divided into two effective sections,i.e. Insurance and Investment, Unit-Linked Insurance Plans are the best options in hand, provided the individual is patient enough to wait until term maturity.