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How to Choose the Best ULIP Investment Plan?

Updated On Oct 09, 2021

A Unit Linked Investment Plan or ULIP is a popular investment instrument. Widely sought after for offering the dual benefit of insurance and investment, ULIPs help investors financially secure their families against instability that could occur after the unfortunate death of the policyholder. Under ULIP, it is important for one to consider their specific requirements and the capacity to choose the level of risk they can handle before making a decision. 

Choosing ULIP Based on Capacity to Handle Risk

If you want to choose your ideal ULIP based on your ability to handle risk, keep the below mentioned options in mind:

1. Equity-based ULIPs

Are you ready to take massive risk under your ULIP? If so, equity-based ULIP would be the ideal option to go with. However, know that with the high risk, the potential for a proportionately higher reward will also come. By investing in an equity-based ULIP you would be able to make your idle savings work for you in the fastest way possible. Equity-based ULIP will be one of the most rewarding types if your ULIP performs well. 

2. Debt-based ULIPs

In comparison to equity-based ULIPs, debt-based ULIPs are quite safe. It must also be kept in mind that the rate of return on investment in debt-based ULIPs is also proportionally smaller. The debt-based ULIPs invest in corporate bonds, government bonds and fixed-income instruments. In general, the performance is pretty plateaued and the profit made is also smaller. 

3. Balanced ULIPs

True to their name, balanced ULIPs are the most flexible kind of ULIPs. This ULIP type places the power of choosing the place of investment into the hands of the policyholder. A policyholder can simply switch between where they wish to invest on the basis of their risk appetite. A policyholder can also invest in equity and debt funds under this ULIP type. Moreover, they can also set the rate of interest. 

If you are ready to invest in ULIP and enjoy maximum returns, it is advisable to keep in mind that you will have to be very careful in making a choice. Make sure you keep the below mentioned aspects in mind before making a final decision:

A. Investment Duration

ULIP plans come with a lock-in period of 5 years. It would be important for you to ask yourself whether you would want to invest in a policy that requires such a long-term investment? Don’t forget that staying invested for a long term like such would give you the best possible return. Moreover, you will be able to benefit from the compounding returns. 

B. Personal Investment Goals

Always choose a ULIP plan that aligns with your personal investment goals. You will get a lot of options to suit your investment needs so make sure you focus on objectives in the first place. 

C. Understand ULIP charges

ULIPs would come with certain charges that would be levied as a fee for managing your investments. Make sure you read the policy wordings carefully. 

So, what are you waiting for? Now that you know how to make a ULIP choice, go ahead with your investment right away! 

Also read - Saving With ULIPs During COVID-19 Pandemic: Everything You Need To Know

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.

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