Unit-linked insurance policies or ULIPs are not only insurance policy but an investment vehicle as well. It ensures that you can keep your family financially protected and also gives you an option to invest and grow your money.
ULIPs are a type of life insurance of policy. Just like in a mutual fund, you can choose to invest in a fund with part of the premium money. You have the liberty to choose a fund of your choice and you also have the right to switch funds according to your investment goals.
This unique combination of life insurance and investment makes it an apt tool to secure your future. Let’s examine some of the properties of ULIPs that makes them worthy.
- The insurance element – Life insurance is nothing short of a necessity and an ULIP plan gives that while giving valuable growth to your money as well. ULIP’s insurance element works the same as a regular insurance policy. The nominee, which is often a family member, will receive the sum-insured if the policy holder passes away during the course of the insurance. If the policyholder survives the term of the insurance, they will get maturity benefits as well.
- The investment element – A traditional life insurance policy will give you a fixed interest for your investment while ULIP plans give you the option to invest your money in different securities through funds. It works similar to a mutual fund. There will be a fund manager who pools money from ULIP subscribers to create a thematic portfolio. The types of funds available to choose in an ULIP plan can be divided into three broadly –
- Equity funds – They invest mostly in equities and have a higher scope of returns but come with higher risk as well.
- Debt funds – They mostly invest in stable income funds like government and corporate bonds, and they tend to give lower yet steady profit.
- Balanced funds – They try to strike a balance between equities and debts. They are also more dynamic, and the portfolio could keep changing according to the market conditions.
- It gives you flexibility to grow your money – ULIP plans give you the flexibility to choose how your money is invested. Your ULIP plan’s returns are based on the performance of these funds and it’s ideal to monitor their performance and make necessary changes according to the market movements to take maximum advantage of the market trends.
For instance, assume that you have chosen to invest in a technology themed fund initially. This fund would track the shares of major technology and IT companies in India. If the growth of these companies declines and you see metal companies rising, you can always opt to switch to a metal company themed fund and make use of the market trends.
For a limited number of times, switching funds in ULIPs is free and after that, you will be charged a nominal fee.
- Lock-in and partial withdrawal – The lock-in period of five years which ULIPs have ensures a disciplined investment. After the lock-in period, you can choose to withdraw partially to invest somewhere else or to use when there is a cash emergency or need.
How to subscribe to an ULIP plan?
Subscribing to an ULIP plan is easy nowadays. Most of the processes are online and it is completely paperless.
Below are the steps you need to follow although the chronology of this may vary for different insurance providers.
- Go to an insurance provider website or app of your choice.
- Register on the website or app with your basic details, such as your name and contact details.
- Compare the types of ULIP plans available and choose a plan that suits you.
- Do the mandatory KYC. Keep your Aadhaar and PAN card ready for this process.
- Provide the necessary medical details.
- Once the medical documents are submitted, you can choose a fund to invest in.
- Once that is done, your premium will be decided, and you can pay your first premium to start your policy.
It’s that easy! In easy seven steps you can buy an ULIP plan and secure your future. If you are confused about anything, you can always take the help of an insurance expert as well.