Are ULIPs Risky Investment Option For Me?

A unit-linked insurance plan (ULIP) is a single policy that combines savings and protection. It combines life insurance and market-linked wealth building into a single package that can be paid monthly or annually by the policyholder. 

Every ULIP comes with a selection of underlying equity and debt funds from which policyholders can choose. Units of the fund are assigned to policyholders after the fund is finalized. The amount of funds available is determined by the fund's valuation as well as the size of the investment. Policyholders can choose from a variety of equity and debt funds, as well as a combination of the two. Investing in funds that match one's life goals is a good idea. Long-term investments, or ULIPs, have maturities of 10 to 15 years. The regulator has set a five-year lock-in term for ULIP investments in order to keep policyholders invested.

However, depending on one's needs, one can readily swap between ULIP funds. Because ULIPs are dual-purpose products, it's crucial to understand how the investing portion works in order to know what to do in the event of market turbulence. The insurance component provides a protective ring around the policyholder, but it is the investment component that drives ULIP popularity.

Will ULIP Be A Risky Investment For Me?

Investing in a ULIP is really beneficial. Below are a few reasons why ULIPs are necessary:

1. Finance Long Term Goals

Because the money is compounded, ULIPs are a good investment option for people who have long-term goals in mind, such as buying a house, a new car, or getting married. Overall net returns are higher as a result. This is true even if you decide to leave after the five-year lock-in term, as opposed to not investing and retaining the money in a savings account or a fixed-income investment. When it comes to unit-linked insurance plans, however, the goal is to keep the policy active for a longer length of time to get the most out of it.

2. Portfolio Switching Flexibility

Unit-linked insurance plans are frequently designed to switch your portfolio between debt and equity-based on your risk appetite and market information. Insurance companies, on the other hand, only allow a certain amount of free swaps.

3. Transparent Structure

The charge structure, investment value, and expected return rate for the policy's whole duration are addressed before purchase. It's typically a good approach to discover more about the goods you'll be purchasing.

4. Flexible Investment Options

ULIPs offer a variety of high, medium, and low-risk investment options through a variety of funds within the same plan. Depending on your risk tolerance, you can choose an appropriate plan.

5. Regular And Disciplined Savings

Unit-linked insurance plans encourage you to save on a regular basis, allowing you to build a corpus for future needs.

6. Income Tax Benefit

Few people are aware that ULIP premiums are currently eligible for a tax deduction under Section 80C of the Income Tax Act, 1961.

7. Life Cover

ULIPs offer both life insurance and investment options. In an emergency, such as the taxpayer's unexpected death, it gives protection to his or her family.

Conclusion

In a word, if you engage in a ULIP, you can gain access to a variety of benefits, including life insurance, tax advantages, regular deposits, and much more. For those who don't have the knowledge or time to observe the markets, fund options like asset allocation or wheel of life portfolio options can be used to delegate this decision to the assurer's fund managers. So go ahead and invest in a ULIP for long-term investments.

Also read - How to Buy the Best ULIP in India?

How Are ULIPs Different From SIPs?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.