A Unit Linked Insurance Plan (ULIP) is an investment product offered by insurance companies that provides both insurance and investment under a single plan. As of result of its dual purpose, ULIPs have emerged as one of the most preferred investment options in recent years. When you invest in ULIP, a portion of your premium is utilized to provide you with an insurance coverage, whereas the remaining premium amount is invested in equity or debt instrument, or a combination of both, as per your choice. ULIP returns can help you meet your long-term goals like purchasing a house, buying a new car, establishing a start-up, etc. If you happen to invest in ULIP, you will get higher returns as compared to savings accounts or bank fixed deposits. However, you must note that ULIPs come with a lock-in-period of 5 years. Therefore, if you choose to discontinue your policy during the lock-in-period, you won’t receive any liquidity or payout. Now that you have a better understanding of ULIP meaning, let us have a look at some other aspects related to ULIPs.
Investing in ULIP with low-risk appetite.
- It is important that you evaluate your risk-appetite carefully before investing in ULIP. Depending upon your risk-taking ability, you can either opt for a high, medium or low-risk investment option under the same policy. If you have a low-risk appetite, you may pick only debt funds to invest your money in. On the other hand, if you have a high risk appetite, you can opt for diversified portfolio of equity funds. To make things easier, ULIP plan also gives you the flexibility to switch between funds. By doing so, you can limit your exposure to equity funds during market downturns, and put your money in safer debt instruments.
- However, if you are looking to invest in ULIP to obtain higher returns over a long-term, it is advisable that you should opt for a diversified portfolio with well-spread risk over equity and debt funds. This is because you may not be able to obtain lucrative returns purely through debt funds. You can also get an estimate of your probable returns beforehand with the help of an online ULIP calculator.
- Apart from the flexibility of choosing between various funds, ULIPs also provide flexibility to choose either the sum assured or the premium based on your requirements.
To sum it up, ULIP plans can prove to be a wonderful investment option for investors willing to take varying degrees of risk, from low to high. This is because of the flexibility to invest in various equity, debt and balanced funds, according to the risk-appetite. Therefore, you must not let your low risk appetite stop you from investing in ULIPs.
Now that you know that you can invest in ULIP despite your low-risk appetite, let us have a look at some of the other major ULIP benefits
- With ULIPs, you can also opt for partial withdrawal of funds in case of any unforeseen events.
- Under section 80c of the Income Tax Act, you can avail tax benefits on the premiums paid towards this policy. Moreover, ULIPs can also help you adhere to regular saving habits.
With the help of leading insurance providers, you can easily avail a ULIP plan and start investing for a financially secure future. Also, many insurance providers offer easy online claim process. Therefore, you must not hold yourself back from investing in ULIP because of your low-risk appetite and consider opting for ULIP goal-based investing. Lastly, make sure that you compare various insurance companies and the ULIP policies before making the final decision. This will help you settle for a ULIP plan that best suits your needs.