ULIPs: The best investment vehicle of modern times

Everything in life is temporary. But one thing which will last long is the seeds of the hard-work and efforts that you sow today and it will help reap the benefits of a secured life in future. The best way to this would be going for a good life insurance plan. While the vast variety of investment products available in the market today might confuse you as to which one of them is the best for securing the future of your loved ones in case of any unfortunate event to your life, ULIPs are considered to be the dual way protection plan that not only offer desired cover for your family but also help you extract good returns from market based funds.

However, many customers in India stay reluctant on market based funds may be because of half knowledge or fear in their minds of market downfall and buy ULIPS with a short-term objective in mind. During volatile market conditions, they press the panic button and surrender the policies or discontinue payment of premiums. However, pressing the panic button will ultimately affect the financial health of the policy holder. Experts say it is important to keep your ULIP policy in process for the complete tenure if you wish to reap a balanced fruit of your money being seeded upon in the market based funds.

Importance of ULIP cover

When people surrender the policy in panic call you actually tend to lose the insurance cover on discontinuance. This way surrendering the policy at wrong time leads to dual loses of investment benefits as well as cover loss. Thus, to keep your insurance cover at the same level again you will need to purchase another insurance policy which might come at higher costs.

Short-Term High Returns Expectation

Usually people treat ULIP as high-yielding products because of the premium payments that they have made for the product. The entire problem lies in the highs and lows of the markets due to which customer try to sell products in short-term frame. Investment returns can turn negative in the short term, thereby reducing the value of your portfolio. Purchase ULIPs by aligning them with your long-term goals and try to complete the entire policy period to get a balanced result.

Higher Charges

When ULIPs are bought they come at slightly higher costs. But these costs get recovered from the premium paid. As the tenure increases, these costs reduce drastically. Keeping ULIP for long term will definitely prove beneficial for you to reap the benefits of higher allocation to invest in the later years.

Spread Amount Evenly

Unit linked insurance policies offer many types of fund options to select. Check your risk appetite and then go for your fund investments. If you’re not an aggressive investor, spread your funds across balanced and debt funds as offered by the insurer. At younger age you can play with risk funds and then move towards the debt funds during the aging years. Also remember you should align your fund portfolio to suit your investment profile and life style.

Fund Switching

Fund Switching is an art and you need to master the art if you wish to reap the benefits from ULIP policies. Ideally it happens that most of the customers switch to debt funds after the markets crash. But such is not the case. You can switch the funds when the market is doing well and switch in the amount when the markets pull down.