May 21, 2024

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How to Make the Most of Your ULIP Investment?



When you invest in the market, you do so with the intention of earning good returns. Besides that, many investors also wish to save money when investing. They want to ensure that they are getting maximum returns by investing the minimal amount that their budget allows. Some might think that this is a difficult task. However, if you choose the right product and apply the right strategic techniques, it is indeed possible and comparatively easier. The first question that arises is, what kind of investment scheme should you invest in? The answer is a ULIP plan. A ULIP is a one-of-a-kind product that cover two vital financial aspects. This article looks at how you can make the most of your investment when you invest via ULIPs.

What is a ULIP policy and how does it work?

Your ULIP premium is divided into two broad sections. A small chunk of the premium creates the life insurance corpus, also called the sum assured. This is the amount that the beneficiaries receive when the policyholder passes away. The remaining chunk of the premium (after the deduction of the charges) goes toward your investment options. You can choose between an aggressive portfolio, a conservative portfolio, or a balanced one, depending on your risk appetite. This is how a ULIP works.

The term ‘Unit-Linked Insurance Plan’ is derived from the concept of allocating a number of units to each investor according to their share of the total investment amount.

Make the most of your ULIP investment with these points 

Plan and prepare 

Before investing a particular amount, ensure to plan and prepare. First, note down how much your budget allows you to invest. Then, get an idea of how long you wish to keep investing. Note down the timeline required to meet your goals. Then, use tools such as the ULIP plan calculator to see the returns you can expect as per your criteria. If the figures are not satisfying, consider increasing your investment amount. This process is a great way to create a ULIP strategy that is accurate to a great extent.

Buy useful riders 

Along with the life insurance coverage of a ULIP policy, one can also opt for several riders to increase your financial protection. Your health policy may not be that useful when it comes to critical illnesses, which is why you should opt for the critical illness rider with your ULIP plan. If you wish for your policy to continue functioning even after you have passed away without putting any pressure on your loved ones, then you can buy the waiver of premium rider. Several such add-ons can help you make the most of your ULIP plan.

Diversify your investment 

The best way to avoid risking your entire money is to spread your investments in a diverse manner. For a ULIP investor, this is quite easy as ULIPs offer a variety of instruments to choose from. From high-risk equity funds, such as stocks, to low-risk debt funds, such as bonds, one can select the right kind of funds as per their budget and risk profile. Rather than investing completely in one asset class, it is best to invest various portions into different asset classes. Thus, if one asset class suffers losses, the rest of the money is still safe and could be profiting from a good performance.

A ULIP plan calculator also helps you understand the returns one can expect when they invest a particular percentage of their money in equity or debt funds.

Switch funds carefully 

Many ULIPs offer free fund switches. However, this does not mean that you switch your funds whenever the market goes through a low phase, or the interest rates rise. To enjoy good returns, one must have a certain level of risk-taking capacity as well as financial discipline. The longer your funds stay in the market, the better will be the returns you receive. Therefore, ensure to take an expert’s advice before switching funds.

Miscellaneous points to keep in mind: 

Choose a reliable insurance company whose past performance has been rewarding for its investors.

Even though the lock-in period ends after 5 years, it is recommended to continue the policy for 10 to 15 more years to gain maximum returns.

Consult a financial expert and read the terms and conditions of the policy before investing to get a thorough idea of what a ULIP policy is