6 Myths About Investing In ULIP
Updated On Sep 12, 2021
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Savings and insurance are important components of a sound financial strategy. A ULIP plan is an example of a unique offering that includes these elements. A ULIP policy, which stands for Unit Linked Insurance Plan, invests a portion of your premium in life insurance and the rest in market-linked securities.
There are a variety of fund and portfolio management options available with these ULIP investment programs. In India, one can choose from a variety of online ULIP programs. Despite its ubiquity, there are a number of misconceptions about ULIP returns, functionality, and other aspects.
This article debunks these myths so you can benefit from this one-of-a-kind investing opportunity.
Myths About Investing In ULIPs
Below given are a few of the myths about investing in ULIP:
1. ULIPs Should Not Be Used To Invest Excess Funds
If you have surplus funds, you can top up the ULIPs at any time if you haven't done so already. The top-up premium can be paid at any moment during the policy's term and comes with the same tax benefits as regular payments.
2. ULIPs Can't Be Phased Out
You can stop investing in ULIPs at any moment once the 5-year lock-in period has expired. You will not be required to deposit any surrender fees if you do so.
3. Market Volatility Reduces Life Insurance Coverage
Many individuals believe that because ULIPs are connected to equities, market returns affect the life cover. This is not true. The life cover, on the other hand, remains the same, with ULIPs paying either the entire life cover or the fund value, whichever is greater if the investor dies.
4. ULIPs Do Not Provide Health Or Accident Insurance
Because ULIPs combine insurance and investment, riders such as Accidental Death Benefit (ADB), Waiver of Premium (WOP), Family Income Benefit (FIB), Hospital Cash Benefit (HCB), and others are available. In the event of such extremes or disasters, partial withdrawals can be used to satisfy additional monetary requirements.
5. ULIPs Are High-risk Investments
Because ULIPs only invest in the stock market, they are considered a risky investment. The level of risk associated with ULIPs, on the other hand, can be chosen based on the objectives of the funds. If you are a risk-taker, you can invest in a conservative fund by choosing a debt-oriented fund. If you are a conservative investor, you can choose an aggressive fund. It also allows you to choose a balanced fund, which is a combination of equity and debt. You also have the option of switching funds based on your risk appetite and time constraints.
6. ULIPs Are Not Cheap
Many individuals think of ULIPs as a pricey investment because of the high premium allocation and fund management fees. This, however, was no longer the case. Previously, the rates were as high as 6-10%, but now the IRDAI has reduced the yearly charges to 3% for the first ten years of holding and 2.25 percent for those who have held for more than ten years. Low-cost ULIPs now have rates that are significantly lower than before, making them accessible to anyone.
ULIP insurance products might assist you in achieving a variety of objectives. They can provide good long-term profits and fit into any budget. These designs are adaptable and suitable for the majority of people. Furthermore, they provide tax* advantages that might help you save money. They also safeguard your loved ones when you are away. So don't be hesitant to invest in these plans.
Also Read: How To Save Tax With ULIP?
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.