A Unit Linked Savings Plan or ULIP plan has been in the spotlight for many years, usually for all the wrong reasons. High-cost structure, low coverage, high agent commission are some of the many myths surrounding ULIP plans.
It has also become a cause of concern for people who want to invest in such plans for wealth creation but are afraid.ULIP plans were once reserved as high-cost structures; it is now changing with time as people are getting aware of the plans and its related features.
Also, the IRDA –InsuranceRegulatory and Development Authority of India – has made it easier for you to invest in addressing concerns. Since then, new plans offer attractive charges and a beneficial structure.
However, common myths still prevail around the best ULIP plan in India. Let us debunk some of them to understand the product better.
A ULIP plan is Costly
A ULIP plan becomes cost-effective over time and offersexcellent value for the money you have invested.
IRDA has already addressed this issue to make plans more cost-effective so that it becomes easier for you to invest. Many charges have been reduced by keeping a maximum charge cap on ULIP plans yearly.
Many new-age plans have also done away with the premium allocation charges, making it a preferred investment option for you. Apart from this, many insurance companies are also returning mortality charges you pay for policy over the years. It is a significant change from old ULIP plans to new.
A ULIP PlanYieldsLower Returns
ULIP plan in India offers substantial returns in the long term.
ULIP plans are a long-term investment tool, allowing you to manage better the volatility of the market by staying invested for a more extended period. Thereby, giving substantial returns.
The long-term capital gains are also exempted from tax, thus, increasing the return. It also offers an insurance cover that safeguards your family and you against contingencies.
A ULIP Plan CarriesHigher Risks
You can choose the level of risk while opting for investment funds.
ULIP plans offer a diverse choice of funds, which you can choose based on your life goals and risk appetite. You can invest in equity funds, balanced or debt funds.
Choosing diversified funds can lower your investment risk. Also, you can switch funds within the best ULIP plan in India at any time as per your goals or convenience. If you don’ t have a high-risk appetite, you can opt for investing in debt funds.
Subject To Market Risk, A ULIP Plan Can Have Reduced Insurance Cover
Insurance cover that you have opted at the time of buying policy remains the same, unaffected by market fluctuations.
Many have heard this myth surrounding ULIP plans that its insurance cover decreases or increases as per market fluctuations. However, the truth is far from this statement.
The sum assured you have opted for while purchasing the policy remains unaffected by the market volatility. If any unfortunate event occurs, your beneficiary or family will receive either the life cover or fund value, whichever is higher. Furthermore, ULIP plans have become customer-friendly and offer a reliable financial planning solution for long-term capital gains.
Dos and Don’ts of ULIP Investments
Some Dos and Don’ts to Follow while Investing in ULIP plans:
Define your goals
ULIP plans are long-term investment plans for wealth creation. Therefore, it is essential to define your goals to achieve desired results in the future. It will also give you the motivation to do financial planning in a better way.
Know Your Risk Appetite
Your risk appetite determines your asset allocation. If you have lower or zero risk appetite, you can choose your investments like debt funds or similar least volatile assets. If you handle market fluctuations better and have a higher risk appetite, you can invest in equities to gain higher returns.
After knowing your risk appetite, you should also look into the amount you can invest in ULIP plans as it will enable you to decide your investment timeframe better.
Create Wealth with a ULIP Plan
Everyone has a wish list of many life goals they want to achieve in a specific period. It can be fulfilled with the help of best ULIP plan in India, which offers you dual benefits of an insurance and an investment tool.
Unit Linked Insurance Plans (ULIP plans) help achieve your dreams by letting you invest in a disciplined manner. These plans are a flexible approach that offers you long-term capital gains by transparently managing your money. Tax-saving is also an additional advantage of investing in the best ULIP plan in India.