We all know that life insurance provides life coverage to the insured person, which further takes care of the loved ones in his absence. However, today, the use of life insurance is not only limited to the life protection but also extended to investment provisions. It’s been long ago that Insurance companies have introduced savings and investment plans. The traditional investment plans are the endowment plans where you get average returns, whereas the new generation ULIPs are the instruments that allow you to invest in aggressive funds as well in order to get significant returns. But while buying ULIPs, you need to consider the following things.
Insurance is More Important than Investment
Since ULIPs offer both investment and life coverage, sometimes people buy these plans only for the sake of building a corpus. Here, you always make sure that more importance should be given to the life coverage as it is the primary goal of the plan. The sum assured you choose must be adequate so that your loved ones need not suffer from any financial crisis.
Stay Invested for Long-Term
People usually look forward to getting a sizeable corpus in a short period, which is not possible in most of the cases. Thus, always set your financial goals accordingly so that it will not affect in case of getting the corpus after a long period. It is not the case that no returns can be gained within the short term, but the aim behind choosing ULIP has to be of achieving the sizeable corpus, which will be possible only in the long run.
You Can Invest into Multiple Funds
Traditional investment plans such as endowment plans do not let you invest in the funds you want. The investment terms are already set. Whereas in ULIPs, you have an option of choosing the funds where you want to invest your hard-earned money. The funds can be selected from equities, debts, bonds, and several other funds. There are about 6 to 8 funds available with the insurers.
Since you have a flexibility of choosing between multiple funds, ULIPs incur several charges. However, you need not pay the charges separately; they are incurred in the premium amount. The charges can be enlisted as administration charges, fund management charges, premium allocation charges, and so on.
ULIPs pay the higher of the fund value, or the sum assured, at the time of unfortunate demise or maturity. Sum assured is the minimum guaranteed pay-out you are entitled to avail.
Lastly, before opting for a particular ULIP, always compare between multiple plans and get the best suitable for your needs.