When one starts on their investment journey, the first thing that they realise is the plethora of investment options that exist in the market. While it can be confusing to have so much choice, with some research it becomes clear how different investment instruments serve different investment needs. Some options offer high returns at higher risk, others offer lower but stable returns. Then there are some other options that come with tax benefits. The investment journey is all about making those trade-offs between different features to arrive at a strategy that suits your risk appetite and profile.
According to a report on “Investment Pattern of Youth in India”, supported by Bombay Stock Exchange, young and new investors in the country are becoming more inclined towards taking risk and hence market-linked investment products have gained favour with them. At the same time, tax saving is one of the main reasons behind investment by the youth. Add to that the current uncertainty that has been highlighted by the COVID pandemic that killed almost 2.5 million people across the world, life insurance has to be one of the core fundamentals of one’s financial planning. What if there was an investment cum insurance product that satisfies all these conditions - that lets you invest in market-linked products with a potential to earn good returns, have a life insurance cover along with it, and get the tax benefits on those investments. While this may seem too good to be true, Unit-Linked Insurance Plans (or simply called ULIPs) are specifically designed to deliver just that. Hence, it is no surprise that they are gaining immense popularity in the country.
Comparing ULIP Plans
While there are a variety of ULIP plans available in the market, it is crucial to understand the various features and components of these policies to effectively make a comparison between them and choosing the one that suits your needs.
Charges and levies: Insurance companies levy different kinds of charges on ULIP plans. These include fund management charges, premium allocation charges, mortality charges, administration and service charges, etc. It is also important to know how much of the premium is being used to provide life cover. Since these charges influence the final returns of the policy, it is critical to invest in a ULIP investment plan with lower charges.
Life cover and tenure: While every ULIP policy comes with a mandatory lock-in period of five years, the tenure of the policy is usually much longer. However, different insurers provide different tenure terms for their ULIP plans. Since ULIP plans have been designed to build wealth over the long term, it is always wise to opt for a ULIP policy with a longer tenure as one can gain through the power of compounding only if he/she remains invested for a longer period. The size of the life cover that the policy provides should also be considered while comparing plans. While the investment component will help you achieve life goals, the life cover will ensure that the life goal is achieved even in your absence. So choose a plan that offers a bigger life cover at lower mortality charges.
Fund options and switches: Since investment is often a reason of investing in ULIPs, naturally you would want to invest in one that offers you flexibility to choose from a range of funds that suit different investment needs. Not all ULIPs have the same number of funds with different asset allocations that you can choose from. So choose a policy that gives you more choices to find the most suitable option that fits your risk profile and investment goal. Another thing to note here is that as life progresses, your goals may change and you may want to switch your money from one fund to another. However, most policies allow a limited number of switches. So, it is always a good idea to choose a policy that lets you do that more frequently.
Buying a ULIP policy
In a digital world, buying a ULIP plan is quick and convenient. You can do it online in just a few simple steps. What you need is your ID proof, age proof, address proof, a recent photograph and any other document in line with underwriting requirements. Eligibility criteria could defer with respect to the ULIP plans selected hence it is always advisable to go through the product details and understand terms and conditions in detail. You can also use a ULIP calculator to check how much premium you need to invest today to accumulate the amount you need to fulfil your life goals tomorrow. Bajaj Allianz Life Insurance offers a range of ULIP plans to suit your needs. One such plan, Bajaj Allianz Life Goal Assure, A unit linked non-participating life insurance plan is a ULIP plan that offers up to eight funds to choose from with unlimited free switches between them along with choice of 4 investment portfolio strategies. It also comes with the return of mortality charge benefit# returning the entire life cover charges at the end of the policy term if all due premiums have been paid.
The bottom line is that consider adding ULIPs to your investment portfolio as they offer a striking balance between providing insurance cover while providing market linked returns over the long run. The added tax benefits on investment is just the cherry on top. So what are you waiting for? Choose a ULIP policy that suits your needs and put your money to work!
Disclaimer: This content is by external third-parties. No TNIE Group journalist is involved in the creation of this content.