In recent years, many financial instruments have been introduced for investors to take advantage of. While mutual funds, fixed deposits of PPFs are quite common, there is one instrument that is becoming popular among investors. ULIP is a product that allows you to invest and get insurance cover in the same policy. First-time investors might get worried whether they could get good returns or not. However, if you already have this policy, here is how can take advantage of it to maximise your benefits.
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What are ULIPs?
A unit linked insurance plan is a type of life insurance policy which offers you the dual benefit of investment and insurance in the same policy. When you pay the premium, half is used for investment and the other half is used for life insurance cover. Investments are made in equity and debt funds. They are made on the basis of your risk appetite and life goals. When you invest in ULIPs, opt for a long-term policy. Not only will you returns grow, the power of compounding over a longer duration will ensure greater maturity benefits for you.
What should you do with your policy?
Given below are few tips to take advantage of your policy and its funds:
Observe the markets
To be able to safeguard your investments and the returns from market fluctuations, it is necessary to keep an eye on the developments in the market. As market fluctuations can affect your investments, reallocate your funds from equity to debt. This way, your gains are not impacted. Keeping a certain part of funds in equity and a major part in debt will ensure that the returns are substantial in the long run. Once the market is stable, you can always switch your fund allocation into equity.
Balance your funds
When you invest in a ULIP plan, a part of your premium is used to invest in either equity or debt funds. Based on your risk appetite, you have the option of choosing either one or both. As equity funds carry a high-risk factor, the returns you gain could be higher, but could also get impacted due to market volatility. On the other hand, debt funds have a lower risk factor, but they also have low to medium returns.
As a policyholder, it is recommended to always balance your funds in a manner which would give good returns without the impact of market fluctuation. Factors such as your goals, risk factors you are willing to take, and the tenure of your policy, shall be considered when allocating money in the funds. These help you in giving a better idea of when your focus is on maximising your profits.
Top-up your premium
A top-up premium is basically an added amount to the premium that you pay for your ULIPs. This type of premium usually comes in handy when the market is growing, which in turn, benefits your investment and returns. Always make sure to keep an eye on the market trends when opting for a top-up premium. Do not increase your premium when the market fluctuations are higher as this could impact your gains. Only go for a top-up premium when the market is stable and giving good gains. Also, the amount should match your goal before you allocate it.
Opt for a fund manager
When talking about benefits, one benefit you can enjoy are the services of the fund manager offered by your insurer. A fund manager will basically handle the allocation of money towards funds in the event you are not able to do it yourself. They will do it for you based on what your requirements are. You are offered different strategies when you opt for auto-switching. Different types of ULIP plans have different strategies, so be sure to check which one is offered to you. One strategy that is offered reallocates your investment in different funds during the different stages of your life. Another strategy is where maximum investment is focused towards equity funds when there is a positive trend in the market. Based on the strategy you select; the fund manager will ensure that the switching of your funds takes place in a systematic manner.
This is how you can make the most of ULIPs. To know more about other benefits, how you can maximise the benefits of your policy and how you can use ULIP calculator to get idea of how much corpus you would require getting your life goals done, get in touch with your insurer.
