Busting Some Of The ULIP Myths
Updated On Jan 31, 2022
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Customers lost interest in the product because of the excessive allocation costs until 2008 when the IRDA imposed required restrictions on ULIP allocation and other expenses. Since then, ULIPs have progressed significantly, and new plans with highly appealing fee and benefit structures have been introduced. Despite their new image, there are still certain misconceptions about ULIPs that keep people from investing in them. The goal of this essay is to debunk some of the frequent misconceptions about ULIPs and put them in their real light.
Busting ULIP Myths
The following are some ULIP myths:
1. ULIPs Are Expensive
ULIPs are no longer unreasonably pricey in reality! Premiums for ULIPs have decreased significantly, and some have even been phased out. ULIPs are difficult to understand investment products with a high total cost of ownership. People believe ULIPs are expensive since the whole premium is not invested in the unit. A ULIP, on the other hand, employs several dynamics to produce more profits while simultaneously providing life insurance, and these additional costs only serve to help consumers get greater returns on their investment. In addition, ULIP fees have been significantly lowered in recent plans, and some online ULIP providers do not impose premium allocation or policy maintenance fees. In addition, the IRDAI has set a maximum fund administration charge cap of 1.35 percent of the fund value, greatly lowering the cost of investing in ULIPs.
2. If the Stock Market Crashes, the Insurance coverage will be Reduced
According to IRDAI, insurance providers must pay the sum guaranteed or fund value in the event of death or maturity. A part of your premium is allocated to life insurance, while the remainder is invested in the linked investment vehicle. In the event of the policyholder's death, contract principles and IRDAI legislation compel the insurance firm to pay the sum promised or the fund value, whichever is larger. In most cases, the sum insured is 10 times the yearly premium.
3. Outcome Of ULIPs
It is entirely up to you to determine how much risk you are willing to accept. To get to your goal, you can travel rapidly, slowly, or at a conventional pace in a car. You will get to your destination sooner if you drive faster, but there are certain hazards involved. That is not to argue that driving a car is without risk. Similarly, you must take some chances and invest in equity-linked ULIPs if you want to develop your money faster and earn larger returns. If you are risk-averse, though, you may want to be a cautious investor and invest in debt funds, which may bring lower returns but more stability.
4. ULIPs have a Low Rate of Return
ULIPs have earned up to 67 percent absolute returns over the last five years. Many investors confuse ULIPs with endowment plans due to a lack of knowledge and assume they provide low returns. On the other hand, ULIPs have regularly given investors positive returns. Future Generali Life Insurance's Pension Advantage Plan was able to provide investors with absolute gains of 67 percent in just five years.
When it comes to money, you have access to the best of both worlds, and ULIPs provide this. ULIPs are a fantastic way to build your money now. They are able to combine insurance benefits with tax savings in this way. Additionally, purchasing ULIPs online saves you money, allowing you to invest more.
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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.