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How to Manage ULIP Funds?

Updated On Oct 03, 2021

ULIP or unit-linked insurance plans offer the best of insurance and investment. One of the key benefits of investing in ULIPs is that they offer regular savings while providing superior protection in the form of a life cover. Under its flexibility of investment benefit, ULIP allows the investor to switch funds, redirect premiums, make partial withdrawals, and add a top-up to enhance the coverage of their policy. There is a huge scope of growth in ULIPs and one also gets greater rewards for staying invested. ULIPs also come with tax benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961. 

How to Manage ULIP Funds?

Are you finding it difficult to manage your ULIP funds? Or do you have no idea of managing them in the best possible way? Below mentioned are some of the key aspects to keep in mind regarding the management of ULIP funds:

  • Since ULIPs come with a lock-in period of 5 years, you must prepare yourself for an investment that is long term.
  • Many ULIPs allow systematic transfers from debt to equity ULIP funds. In case you pay an annual premium, you can initially invest in a debt fund and avail the option of  systematic transfer to an equity fund. It would be very similar to Systematic Transfer Plans (STP) that have gained immense popularity by now. You can definitely consider using it in order to lower your investment risk.
  • Multiple ULIPs come with a lifecycle-based strategy. This strategy automatically splits the investor’s money between equity and debt based on the basis of their age. You can easily adapt this strategy if investing in ULIP for your retirement. 

Also Read: ULIP Or ELSS? Which Is Better?

  • Periodic review of the performance and prospects of ULIP funds is a must. You should switch out of ULIP funds that have underperformed or funds the asset class of which is overvalued. To attain the same, you would need to switch out of an equity ULIP fund and move into a debt ULIP fund. There will not be any tax charges. There may be some costs, but keep in mind that many ULIPs provide a certain number of free switches to investors on an yearly basis. 

In case you have been struggling to find the best ULIP, keep in mind that it would be beneficial to consider key aspects like claim settlement ratio or CSR, solvency ratio, performance of ULIP funds, cost, and investment strategies offered while making the final decision. 

If waiting for the right time to invest in ULIP, know that there is no right time to invest in ULIP. The earlier you start investing in ULIP, the better it would be for you to attain your goals. 

One of the best ways to gain maximum returns from your ULIP is by starting early, investing regularly, paying premium on time, taking advantage of different fund options & strategies, reviewing portfolio regularly, adding riders to strengthen the cover, and maintaining the ratio of investment to insurance for tax benefits. 

Also read: Tips And Advice To Choose The Best ULIP In India

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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