Growing wealth is not an easy job unless you are blessed. For exponential growth in your investments, it is important that you choose market-driven financial instruments. ULIP for that matter is a safe option to invest. Why?
It is because ULIP are dual benefit plans that provide both life cover as well as opportunity to invest your money to seek high returns. Let us first read what ULIP is and then move on to reading the mistakes that you should avoid before buying one.
What is a ULIP plan?
ULIPs is a life insurance policy that helps the life insured to build wealth as well as offer the family’s financial security. A portion of the premium you pay under ULIP is given towards the life protection cover, while the other portion is invested in the funds of your choice.
ULIP gives investors a freedom to choose between different funds. Policyholders are also allowed to switch between the funds depending on their risk appetite. If the individual is looking for high returns, then investing in equities is favourable. Those who are risk averse and want to remain invested without losing their money can invest the money in debt funds. And policyholders who want to maintain a balance, can invest their money in balanced funds.
ULIPs offer several benefits, but before investing in the policy there are a few things you must take care of so that you do not end up losing your money.
Mistakes to avoid when buying a ULIP.
It is always important before making an investment, you must understand what is ULIP and does the investment solve your purpose. After that, you should know the mistakes to avoid when buying a ULIP.
- Select the incorrect plan in a hurry:
You typically have a wide variety of ULIP plans from which you can make a selection. An individual must make a selection after considering the rate of return on investments and the risk bearing capacity. You can consider equity plans on the first chance if you need a more prominent yield and are ready to take more chances with your money. Any other way, you can pick between debt funds for the safe returns. Many individuals make the blunder of choosing the wrong arrangement without acknowledging it. You must consult your financial guide and ensure the ULIP plan you buy satisfies your demands.
- 5-year lock-in does not mean exit the plan:
ULIP comes with a 5 year lock-in period which means that you cannot withdraw your money from the funds anytime before 5 years. But that does not imply that you must exit the investment after the completion of 5 years. Stay invested for a long time to get high returns. With ULIP, you can save for your future goals, child’s education, child marriage, or retirement. ULIPs are a part of long term financial strategy and you must stay invested for a long time.
- Investing only for the tax benefits
ULIPs are investments not just for the tax benefit. The life insurance policy provides life cover as well as opportunity to grow money by investing in different funds. The premium you pay under ULIPs are eligible for tax deduction under Section 80C of Income Tax Act, 1961. The total amount of deduction allowed under ULIP is Rs.1.5 lakhs. Though you cannot withdraw the money from ULIP before 5 years, even if you want to you will have to pay the tax on the amount of money received.
- Buy ULIP with adequate sum assured.
Buying a ULIP is often with the intent to build financial security for your family when you are not around. If you select a sum assured which is low just to save premium today, the funds will quickly finish. This is why you must choose ULIP with a high sum assured to build huge funds for your family’s financial security.
- Define the investment goals instead of going random
If you want to save more for a bright future, it is important that you choose the funds and your investment strategy. The investment allocation should be based on your goals. If you are looking for stable returns and do not want to play with the rate of return, then choosing the debt funds is favourable.
- Stop the premium payment
At times individuals stop the premium payment and invest under ULIPs thinking that the lock-in period is lengthy. You should not make this mistake because ULIP is a product that yields returns only after a long period of time. If you randomly stop paying the premium after the first year and try to withdraw the money after the end of the lock-in period, the insurance company will penalise you. The penalty amount will be close to the net asset value of your total investment for the five years.
Later, the amount that will be given to you will be treated with the deductions of fund management charges, annual charges, and surrender charges. After releasing the payment, the insurance cover will immediately cease.
- Hide relevant information.
The basic principle of insurance spells out that you must not hide anything from the insurer. If at the time of buying ULIP, you try to hide the meaningful information about your medical history, you will not receive any benefit under the policy.
- Ignore the charges.
Be mindful that ULIP involves fund management for the amount of money that you invest. Under the policy it is required that you must monitor the growth of the funds. If you are not able to do so, the insurance company takes care of the fund management. They charge you fund management fees. Along with this, they can also levy mortality charges, etc. These amount close to 4%-5% of the premium amount you pay.
Best ULIP Plan.
The best ULIP plan that you can consider buying is
ABSLI Wealth Aspire Plan
- ABSLI Wealth Aspire Plan helps you achieve your life objective by enabling you to protect and save wealth.
- The plan allows you to choose from 3 plan options.
- The Wealth Aspire Plan gives you flexibility to choose from 4 investment options according to your investment needs.
- You can also select the riders to enhance the scope of coverage.
- The insured also gets flexibility to withdraw partially from the funds in case of an emergency.
- You can buy the ULIP plan online from https://lifeinsurance.adityabirlacapital.com/ulip-plan/wealth-aspire-plan
ABSLI Smart Growth Plan
- ABSLI Smart Growth Plan is a ULIP that offers financial security for a family’s safe future. You can create wealth and get life cover under the same plan.
- The ULIP plan allows you to choose from 16 funds and 5 investment strategies.
- Easy switching between the funds without any additional cost.
- The policy also provides wealth boosters and loyalty additions to increase the fund value.
- The ULIP gives you an option to increase the scope of the coverage with the rider covers like ABSLI Accidental Death Benefit Rider Plus and ABSLI Waiver of Premium Rider.
- You can read more about the plan and buy the plan from https://lifeinsurance.adityabirlacapital.com/ulip-plan/absli-smart-growth-plan
There are different factors that you must keep in account when it is about buying a ULIP plan. The insurance policy has benefits you with high returns and takes care of your family in your absence. Before buying the policy, you must read this about ULIP.