This is what a ULIP is – it’s an investment vehicle that comes with life, health, and accidental cover. ULIPs are considered to be one of the best ways of wealth building, with added advantages of an insurance cover.
Your total investment in a ULIP is split into different segments. A part of your investment goes for your life cover while the rest of the funds can be utilised based on your investment choices. You can choose to invest your money in debt, equity or hybrid funds.
You can also make a choice for your premium payment as monthly, quarterly, half-yearly, or annually.
The total value of your policy depends on the amount you have invested. Also, the profit you make tends to depend on the duration of your investment.
Now let’s discuss a few things you didn’t know about ULIPs:
- ULIP charges – Before you put in your hard-earned money into any investment plan, you must know everything about it. ULIP investments generally attract a few charges. They are –
o Premium allocation charges – Include expenses incurred by the insurance company, i.e., agent’s commission, cost of agreement, medical expenses, etc.
o Administration charges – A monthly fee that ensures the administration of your policy.
o Fund management charges – A percentage of your fund’s value, which is levied for managing your funds.
o Surrender charges – You’ll have to pay this if you choose to surrender a ULIP before maturity.
o Partial withdrawal charges – After three years, investors can partially withdraw funds but after paying some predefined charges.
o Mortality charges – These charges provide death cover to the insured after evaluating their health conditions.
o Switching charges – Investors get a fixed number of free switches every year. Switching funds after that invites charges.
o Premium redirection charges – These charges are levied when you redirect your premiums towards another investment option, without interrupting the existing fund structure.
o Guarantee charges – Insured must pay guarantee charges to get guarantee returns.
o Rider charges – Just like in any other policy, a rider allows you to avail benefits apart from the base plan.
- Risk management: One of the most prominent features of ULIP is risk management. You always have the flexibility of putting your funds at higher risk with more returns or at low risk with minimal expectations. The key is, you can decide for your money.
- Life cover: Not only do you get a life cover in a ULIP, but your sum assured for life remains untouched even if the market is fluctuating. So, in the end, you get the ULIP benefits as committed to you in the beginning.
- Top-ups: Top-ups are the riders that you can choose as per your requirement and take advantage of. For example, you can always cover critical illness or accidental cover under your ULIP as a rider. These are separate additions in the base plan offered by the insurer. Also, these riders, taken at any time during the existing policy, can give you tax benefits just like your regular premiums.
- Health and accidental cover: This feature can be availed as a rider on the base plan. If you are looking for health, accidental and critical illness cover under one plan, ULIP could be what you’re looking for.
- Fund switch: With ULIP, you can always switch your funds to a safer investment mode where you believe the risk is lower. Similarly, if you are willing to put your funds at a higher risk and generate higher revenues, you can make that switch too.
- Fund withdrawal: After completion of the lock-in period, you can withdraw your funds and discontinue investing. Also, you will not have to submit any surrender charges after the lock-in period is over.
ULIP could be a wise choice if you are looking for a flexible investment option with many added advantages. If you are considering ULIP, market research and expert advisory are of great importance and luckily, resources for both are easily available online.