Top Questions to Ask While Buying Unit Linked Insurance Plans

When SEBI interfered a few years ago, ULIPS' charges and structure underwent significant adjustments. Today's ULIPs have been redesigned and now include some of the best features. Investing in ULIPs has never been more rewarding than it is today, and you, as an investor, have the opportunity to benefit from it. Though investing in a ULIP is a wonderful idea, there are a few things you should be aware of or questions you should ask before doing so. 

Are you putting your money into a ULIP blindly? What kinds of inquiries should you be asking? 

Let's see what happens. 

Top Questions to Ask While Buying Unit Linked Insurance Plans

Following are the key advantages of riders in a ULIP:

• Is The Plan Appropriate For Your Needs?

The most critical consideration is if the plan will help you achieve your financial objectives. Although a ULIP allows partial withdrawals, such withdrawals are only permitted after 5 years. Furthermore, while the returns on a ULIP are good, it is necessary to retain the plan for a longer period of time to attain such returns. So, before you buy, make sure the plan meets your financial needs.

• What Charges Are There?

When SEBI did not interfere a few years ago, ULIPs had massive expenses deducted from the premium, resulting in very low yields. ULIPs now have a very low charge structure, which maximizes returns, thanks to the improvements implemented. Premium Allocation charges, fund management charges, mortality charges, administrative charges, and so on are all included in ULIP charges. Many plans do not levy the premium allocation charge, despite the fact that the other expenses are unavoidable. So, look into the price structures of the various plans and choose the one with the lowest fees.

Must read: Which Is Better ULIP Or Term Insurance?    

• What Kind Of Coverage Do You Have?

Under ULIPs, the Sum Assured is determined by the amount of premium paid by the policyholder. The premium coverage is calculated as a multiple of the annual premium or a single payment. The number of multiples allowed varies by plan, so make sure you know what's covered in the one you're considering.

• What Are The Portfolio's Historical Returns?

Because of its variety, a ULIP offers good returns. The funds under the scheme have a diversified portfolio that includes several companies. Because ULIPs are exposed to market risks and returns are not guaranteed, it is critical to review the funds' previous performance. This will provide you an estimated, but not exact, the trend of expected and generated returns.

• What Are The Requirements For Flexibility? 

ULIPs are popular among investors because of their flexibility. A ULIP has a lot of flexibility when it comes to switching, partial withdrawals, premium redirection, top-up facility, and so on. This flexibility is provided by all plans, but it is subject to certain criteria. For example, there is a limit on the number of free swaps that can be made, as well as a limit on the number of free partial withdrawals that can be made. As a result, you should find out what the plan's free facility limit is before purchasing it.

Conclusion

A ULIP  policy stipulates a death benefit, which is the amount paid to the nominee if the policyholder dies within the policy's term. Furthermore, if the insured lives to the completion of the ULIP's term, the policyholder will receive the maturity value of the ULIP. This is the sum generated by the ULIP's equity and/or debt investments.

Also read: Is ULIP and SIP The Same?

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.