With increasing uncertainties in the global world, every individual must do adequate financial planning to ascertain a comfortable and peaceful life anytime. Investing in varied, flexible financial instruments will prove beneficial in achieving the same. Unit linked insurance plan is considered one such effective product that can help you secure your family and increase your wealth in the long term. Here is a detail about what it means and 7 ways to get better returns.
What is a ULIP Plan?
Unit linked insurance plan is a comprehensive life insurance policy that provides a life cover to secure your family in case of your unexpected demise and market-linked returns at maturity. In addition, it allows you to choose the fund option to invest in and the flexibility to switch between them. It has a 5-year lock-in period, after which partial withdrawal is permissible.
Insurers offer online purchases and flexible features to make the investment in the ULIP plan highly profitable. For example, the Tata AIA life insurance plan offers a secure online platform that helps you browse through the features, calculate the affordable premium and utilise the flexible measures maximally to reap the highest returns based on your individual needs.
Ways to Increase the Returns in the ULIP Plan
While the comprehensive life insurance policy allows for utilising the life cover and the investment benefits, it is important to utilise the flexible features and other opportunities to maximise the market-linked returns. Here are a few ways to do it.
- Invest rightly based on your risk appetite – One part of the premium in a ULIP policy goes to investing in financial securities. And, insurers allow you to invest in the ULIP plan and the financial securities based on your risk profile. Therefore, analyse your financial status and long term commitments to choose between the equity, debt and hybrid funds to maximise the returns of ULIP plans.
- Analyse your financial position and invest maximally – Analyse your current income sources and commitments to prepare a budget for your routine financial expenses. Consider also your short term and long term financial commitments to manage emergencies. Further, based on these evaluations, allocate a specific higher fund to invest in the ULIP scheme regularly and comfortably. It will help you develop the discipline to pay the premium regularly to stay invested to reap maximum returns.
- Switch between the fund options based on the requirement – When you invest in the ULIP plan, you can also switch between the fund options based on the prevailing economic conditions. So, if you feel your investment is decreasing in value, you can always switch to a conservative fund to preserve the investment value.
- Be aware of the price movements based on market conditions – Keep yourself well informed of the prevailing market conditions and other factors that can affect your investments and take timely actions to secure your investment in the comprehensive life insurance policy. You can take the help of fund managers to invest and maintain your investment smartly.
- Choose a longer policy term – Always choose to invest in the unit-linked insurance for a longer term. The longer you invest, the higher the returns. So, even if your equity investments are losing value, they can get corrected in the long term to ensure maximum returns at maturity.
- Staying invested for the tax benefit – ULIP plans qualify for a tax deduction and exemption under Section 80C and Section 10(10D) of the Income Tax Act, 1961, based on the existing terms and conditions. Therefore, considering the tax benefits, you can increase the return when you stay invested and pay the premium regularly.
- Revise the ULIP investment based on different stages in life – The investment fund value need not remain the same throughout the policy tenure of a ULIP plan. Instead, you can revise or top up the investment based on different milestones. You can also revise the choice of the fund option based on the changes in the risk factor. For example, the affordable risk can be higher at a younger age and lower as you get older after getting married and having children.
Investing in the ULIP policy is important to secure your family’s future while increasing your wealth in the longer term. You can increase the value of a high return ULIP plan by choosing the right fund option, switching between them when required, investing in the long term, staying invested for tax benefits and revising it based on the changing life scenarios. Therefore, invest in the ULIP plan, make smart decisions and ensure higher returns.