Who Should Buy ULIP?

A Unit Linked Insurance Plan widely known as ULIP is a combo of life insurance coverage and investment in the capital market. The premium paid towards the plan is bifurcated into two parts. The smaller portion is allocated for providing life insurance coverage for the policyholder while the other larger part is invested in shares, debt funds or maybe a hybrid investment as per the choice of the policyholder.

The insurer pools the premiums paid by different policyholders and makes it one large common fund. This fund is invested into the capital market as per the choice of the investors. The insurer divides the pooled money into units and assigns a particular value for each of it. The number of units allotted to a person depends on the premium paid. Therefore, the returns of the plan depend on the market performances of these funds. The policyholder is also allowed to switch funds after the lock in period(first five years), within the same plan.

Who Should Buy a ULIP?

There must be a particular objective to purchase a ULIP. It is advised to invest in this plan for a longer period as the ULIPs return a higher amount over a longer period. So you need to have a long term goal for purchasing a ULIP. Investment in ULIP also depends on your risk appetite and financial circumstances. The following are the stages of life where you can opt for a ULIP.

Individuals who have just started their career

They can begin by taking up a balanced fund option for lower financial risks. As they make financial progress in their careers, they can switch their funds to slightly risky equity funds. As they are young they can have a high risk appetite and also have an opportunity to invest for a long period. As said earlier, the longer the funds stay invested, the higher are the returns.

You may also like to read:- Difference Between ULIP and Endowment Plans 

People planning for Retirement

Those people who wish to have a regular flow of income after their retirement can also choose the ULIPs. They can choose a suitable ULIP to accumulate funds which are available after the maturity of the policy. The ULIP can also be converted into an annuity plan as per the Choice and requirements of the policyholder. Therefore, one can get periodic payments even after their retirement. 

People starting a family

ULIPs are advantageous to those people who are planning to start their family. The ULIPs offer children education facilities. Therefore, the individual can select a suitable ULIP for his/her children's higher education.

Also Read:- Know How ULIP Returns are Calculated

Conclusion 

Unit Linked Insurance Plans are emerging to be a popular financial product these days. They are suitable for people who are interested in entering the capital market and having a good risk appetite. But before choosing the ULIP, one should be aware of the set of charges that are levied on the ULIP plans which include premium allocation charges, mortality charge, Policy administration charges and fund management charges. Another important thing is that one should always go for a long-term investment horizon as that will lead to higher returns. Taking up a Policy is a personal decision of the individual, therefore he/she should consider the age, income, circumstances and risk factors before choosing the most suitable plan.

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.