Avoiding few mistakes can maximize the benefit of ULIP plans

1. Avoiding few mistakes can maximize the benefit of ULIP plans

2. ULIP stands for unit linked insurance plan, which is designed to bridge the gap between tax benefit and life insurance; it is a combination of investment & life insurance. ULIP plans offer the policy holder to invest some portion of the premium in equity or debt funds & the rest for life insurance. Policy holder keeps on investing for five, ten or fifteen years and accumulates the units. Selection of the investment funds, depend on the risk appetite of the investor. If they are aggressive investor & are ready to take the risk, then they can invest in equity. Conservative, risk averse persons who prefer stability can opt for the debt fund.

3. There are various occasions in life, when we need lump sum amount of money, like children’s education, marriage, a long awaited foreign trip or to have a lump sum amount in hand for the autumn years. But a normal term insurance plan cannot provide you that, it has only death benefit or with return of premium rider you can get back the paid premiums; which are not sufficient. Investing in stocks & bonds can get you maximum returns but are subject to market risks, more over it doesn’t have an insurance value or tax benefit. In both the given scenarios you would get either insurance value or lump sum amount. New ULIP plans are the most preferable options of investment in today’s market, according to the financial experts.

4. A person often commits a set of mistakes that reduces the value of the ULIP policies, some of them are listed below:

5. They invest in the plans without knowing the purpose; we just save in purpose of saving & getting a tax benefit. This often leads to misuse of the matured amount. • Without calculating the insurance cover, we invest in the ULIP plans and stake our money in the wrong fund only to gamble blindly. Though equity funds can get you good returns but it is subject to market conditions. So invest in equity only when you already have proper savings. • Only to save  tax we often buy the policies and ignore the utility of the plan. This results in diluting the benefit of the policy.

6. We prefer buying the policy from agents and wait for them to collect the premium money, forgetting the dates. This may result in lapse of the policy. • The claim-settlement ratio of the firm often secures the maturity value you would get smoothly. More the percentage better is the firm for you. But in a hurry we often buy the policy from the one which comes first without comparing the ratio. • Policy holders are in a hurry to redeem the policy in short span. • The above mentioned mistakes are the most common ones, which most of us commit and need to ensure that we are careful while making such important decision. 

7. It is better to invest in the ULIP plans when you are:

8. Young enough to take the risk to invest in the equity funds & earn profit. • Have medium to long term financial goals to achieve and have other savings.  • Have proper knowledge of the market fluctuations. On time switching of funds can help you to be on the safer side. 

9. ULIP plans can enhance your savings with high returns

10. ULIP plans can enhance your savings with high returns from the equity funds, when the markets flourish. So use this financial tool to reinforce your future savings. You also get a tax benefit under section 80C on the premiums you pay & section 10 (10D) on the matured amount.

11. There are several other benefits for having Ulip Policy Click here to know more