How To Choose The Right ULIP In 5 Easy Steps?

A rise in equity markets, as well as the creation of a new breed of market-linked insurance products, such as ULIPs, occurred over the same time period.

Unlike traditional insurance products, which prioritize the insurance component over the savings component, ULIPs prioritize the savings component above the insurance component.

More importantly, the presence of a large number of variants allows investors to select a product that matches their risk profile; for example, someone with a high-risk appetite can avoid traditional endowment plans (which invest about 85% of their funds in debt instruments) in favor of a ULIP that invests its entire corpus inequities.

In 5 Easy Steps, How To Choose The Right ULIP?

Below are 5 easy steps to choose the right ULIP:

1. Be Familiar With The Idea Of ULIPs

Before purchasing a ULIP, do as much research as possible. This way, you'll know exactly what you're getting into and can make an educated decision.

More significantly, it will ensure that you don't have any nasty shocks down the road. Our experience reveals that most investors are unaware of what they are getting themselves into, and unethical salespeople should be given a lot of 'credit' for this.

Gather information about ULIPs, including the numerous options available and how they work. Examine ULIP-related information available on financial Web sites, periodicals, and insurance company sales literature.

2. Concentrate On Your Requirements And Risk Profile

Determine which plan is best for you (in terms of allocation of money between equity and debt instruments). When it comes to selecting a plan, your risk appetite should be the decisive factor.

As a result, if you have a high-risk tolerance, an aggressive investment strategy with a bigger equity component is more likely to fit you. Similarly, before choosing a plan, you should consider your current investment portfolio and the equity-debt allocation within it. Choosing a plan that is lop-sided in favor of equities just for the sake of generating attractive returns may and does lead to disaster in the majority of cases.

3. Compare The Various ULIPs Offered By Different Insurance Firms

Compare the products offered by different insurance firms based on factors such as costs, premium payments, and performance. For example, since ULIPs rely on premium payments rather than the sum assured like traditional insurance products, information on premium payments will help you obtain a better understanding of the minimum expenditure.

Compare the performance of ULIPs, including the debt, equity, and balanced schemes, as well as the portfolios of other plans. Because expenses are a big element in ULIPs, a review of this aspect is also necessary.

4. Opt For A Seasoned Insurance Advisor

Choose a financial advisor who is not just knowledgeable about the debt and stock markets, but also independent and unbiased. Request references from previous clients and double-checks his service standards.

When your agent suggests a ULIP from a certain business, ask him some product-related questions to put him to the test, as well as why other assurers' products should not be evaluated.

Insurance counsel must always be neutral and independent; also, your agent must be willing to advise you about the benefits and drawbacks of purchasing a specific plan. His duty should not be limited to filling out documents and providing receipts; instead, he should maintain track of your strategy and provide you with regular recommendations.

5. Is There A Minimum Guarantee On Your ULIP?

Protecting the investment's downside in a market-linked product might be quite beneficial. Find out if the ULIP you're thinking about has a minimum guarantee and how much it costs.

Conclusion

Understanding how ULIPs work can be difficult for those who are unfamiliar with them. ULIPs are clearly a complex proposition due to what appear to be greater expenses, rigorously defined insurance and investment components, and the influence of markets on the corpus. ULIPs need greater participation from both the assured and the insurance advisor. Traditionally, the role of the insurance seeker was passive and limited to making premium payments.

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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.