Unlike mutual funds, a Unit Linked Insurance Plan (ULIP) comes with the dual purpose of insurance and investment under a single integrated plan. This means a part of your premium goes toward life cover, and the remainder goes into a fund just like in mutual funds. Before investing in them, however, here’s what you need to understand about ULIPs:
How can you invest in ULIPs?
There are a few things that you need to bear in mind while investing in ULIPS.
Lock-in period
Typically, ULIPs come with a 5-year lock-in period. Since it is a combination of a life insurance policy and mutual funds, it’s best to keep the investment for a longer tenure like 15 years or more. Make sure to take all your financial parameters into consideration before deciding on the tenure to get the maximum benefits.
Your goals
Before investing in a ULIP, you need to determine the goal you’re looking to attain via the investment. Make sure you make a list of all your financial goals and compare between different plans to see which is the best to achieve your goals.
Risk appetite
Similar to investing in mutual funds online, you must assess your personal risk level based on your goals before choosing a ULIP, so you get one that is aligned with your needs. With ULIPS, ones that invest in equity funds are riskier compared to those that invest in a debt fund. Take your time to figure it out.
Follow these steps to invest in a ULIP
Step 1 – Conduct proper research on the ULIP products available in the market and make a list of all the products from different insurers which will help you select the best plan.
Step 2 – Understand the different features of the life cover as well as the investment profile of each plan. Use apps equipped with intuitive software that will enable you to customize the plans based on your goals.
Step 3 – Choose the product that helps you achieve your insurance and investment goals. You can also calculate the amount of premium that you will have to pay. Some insurers may allow you to pay a monthly premium just like a SIP.
Step 4 – Get in touch with the respective insurer or visit the insurance office to learn more details about your chosen plan.
Step 5 – If the product meets your goals, you can choose to go ahead and invest in it.
Before you invest, take your time, understand what the product offers, its inclusion, exclusions, and other details which will help you make an informed decision. Once you’re clear, go ahead and invest through SIPs using investment apps like the moneyfy app. Until then, keep learning and comparing between different ULIP products and what they can offer you!
