ULIP Myths Busted
Published On Feb 01, 2022 11:15 AM By InsuranceDekho
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Investors lost interest in the product due to high allocation charges until 2008 when the IRDA put mandatory limits on ULIP allocation and other fees. ULIPs have come a long way since then, with current plans including extremely enticing price and benefit structures. Despite their new image, there are still certain misunderstandings regarding ULIPs that discourage individuals from investing. The purpose of this paper is to dispel some common ULIP myths and put them in their proper context.
Busting ULIP Myths
Some ULIP misconceptions include the following:
1. ULIPs are Costly
In truth, ULIPs are no longer prohibitively expensive! ULIP premiums have dropped dramatically, and some also have even been phased out. ULIPs are complex investment products that have a high total cost of ownership. People still believe ULIPs are expensive since the whole premium is not invested in the unit. A ULIP, on the other hand, uses numerous dynamics to generate more profits while also providing life insurance, and these extra expenditures simply serve to assist clients to earn better returns on their investment. In addition, some online ULIP providers do not charge premium allocation or policy maintenance costs, and certain ULIP rates have been drastically reduced in recent plans. Furthermore, some certain online ULIP providers do not impose premium allocation or policy management fees, and some ULIP prices have recently been dramatically decreased.
2. Insurance coverage will be reduced if the stock market crashes
In the case of death or maturity, insurance companies must pay the sum promised or fund value, according to IRDAI. A portion of your premium goes toward life insurance, with the rest going into the connected investment vehicle. Contract principles and IRDAI regulations force the insurance business to pay the sum pledged or the fund value, whichever is greater, in the case of the policyholder's death. The sum protected is usually 10 times the annual payment.
3. ULIPs' Outcome
You have complete control over how much danger you are willing to take. In an automobile, you can move quickly and slowly, or at a normal pace to reach your destination. Driving faster will also bring you to your destination faster, but there are also certain risks associated. That isn't to say that driving a car is risk-free. Similarly, if you want to grow your money quicker and make higher returns, you have to take some risks and invest in equity-linked ULIPs. If you are risk-averse, though, you may prefer to invest in debt funds, which may provide lower returns but more stability.
4. The Return on ULIPs is Low
Over the previous five years, ULIPs have achieved up to 67 percent of absolute returns. Due to a lack of awareness, many investors mistake ULIPs with endowment plans and believe that they provide low returns. ULIPs, on the other hand, have consistently provided positive returns to investors. The Pension Advantage Plan of Future Generali Life Insurance was able to reward investors with absolute profits of 67 percent in just five years.
When it comes to money, you have the 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 and additionally, purchasing These ULIPs online saves you money, allowing you to invest more.
Also read- How To Get Better Returns With ULIPs?
Should I Purchase An ULIP For Wealth Creation?
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.