5 Popular ULIP Myths Clarified
Updated On Apr 23, 2021
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Unit-Linked Insurance Plans (ULIPs) are policies that provide the benefits of both an insurance and an investment plan under a single policy. They are highly flexible policies that give ample opportunity to the policyholder to grow their investments without compromising on life cover or death benefits.
More often than not, however, there are a lot of myths surrounding ULIP. Do not let these keep you away from knowing whether a ULIP will be a good decision for you. Read on to get ULIP myths clarified.
Also Read:- Things You Should Know About ULIPs
5 Popular Myths About Investing in ULIPs
Following are some of the common myths relating to ULIPs and their corresponding facts -
Myth 1: ULIPs are Costly
Fact - ULIPs, contrary to popular belief, are not that costly. In fact, all the charges that you have to pay to contribute to yield high returns. Furthermore, the process is completely transparent and you will be promptly informed about all charges. You can switch your funds anytime and there are also tax benefits. In the long run, ULIPs are not that costly at all.
Myth 2: Insurance Cover depends on Market Trends
Fact - There is often a fear that, affected by market trends, ULIPs will decrease your insurance cover. There is, however, no truth to this. The funds allocated to your insurance component is separate from those allocated to the investment component. The sum assured under your insurance is not affected by market trends and is liable to be paid as a death benefit.
Myth 3: ULIPs are Short-Term Goals
Fact - Although you may withdraw from a ULIP after a short period, they truly flourish when you invest in them for a long time. The longer you stay invested in ULIPs, the more benefits you get such as adders. After the lock-in period of five years, you can withdraw your funds anytime. There are also no surrender charges for this.
Myth 4: Switches between Investments are Chargeable
Fact - Most companies offer free switches. You can switch between investment types anytime. Moreover, there are also no taxes charged on these switches. Whether you are looking for higher returns or are willing to take on more risks, you can choose your investment type accordingly.
Myth 5: ULIPs are Risky Policies
Fact - This entirely depends on you and the amount of risk you are willing to undertake. While equity fund based ULIP investments are riskier with higher returns, the cash instrument based ones have lower risks and moderate returns. You are free to choose whichever you want. Plus, as we have already mentioned, you can also easily switch between them anytime.
You May Also Like to Read:- What is Fund Switching in ULIPs?
It is important to equip yourself with facts and clarity before you venture into buying any plan, particularly ULIPs. There are a lot of misconceptions that might ultimately keep you away from getting great benefits. Always make sure to verify the truth behind what you might hear, from trustworthy sources. For your benefit, we have compiled some of the most common ones.