1. How to know if a ULIP is the right investment instrument for you

How to know if a ULIP is the right investment instrument for you

Want to invest for your future financial needs? Need good returns? Wondering where to invest? If yes, then try to answer these queries first:

Updated: December 22, 2017 6:18 PM
ulip, insurance How to know if a ULIP is the right investment instrument for you

Want to invest for your future financial needs? Need good returns? Wondering where to invest? If yes, then try to answer these queries first:

For goals like retirement and child’s education would you ?
Go for wealth creation, even if it’s high risk
Create wealth with a safety net

Is tax saving important to your investment?
Yes, but I also want significant wealth creation
Tax-saving is the prime objective

Do you want flexibility of using your funds?
Yes, I want the option of partial withdrawal
No, I want a huge corpus

ulip, insurance How to know if a ULIP is the right investment instrument for you

While these queries help you have a clearer idea about your investment goals, risk appetite and how to achieve said goals, no matter which answers you choose, ULIPs (Unit Linked Insurance Plans) are the most suitable product for you. ULIPs work well for those who want to build a sizable nest egg for their retirement. Or, for those who need funds for their child’s education (or their eventual wedding). Even if you want to accumulate funds to meet your personal goals or for medical emergencies, ULIPs fit the bill as they allow you to partially withdraw from a huge maturity corpus. However, if your investment horizon is below five years, then avoid going for ULIPs as they now have a lock-in period of five years.

If you want to invest for more than a five-year period, here’s what makes ULIPs a compelling investment option:

# Life cover with good returns: ULIPs offer the twin benefits of getting life cover and market-linked returns. So, while you can look for good returns over the long term, your life remains protected; giving you peace of mind.

# Flexibility and the option of switching funds: ULIPs give you the choice of investing across different types of funds—pure equity or debt funds or a combination of both—and also switching between the funds linked to the plan. Although, this depends upon your changing financial needs and risk appetite. Thus, these plans are suitable for all kinds of investors; whether they are risk-averse or those with a strong risk appetite. The icing on the cake is that these switches have no tax implications!

# Systematic investment: ULIPs allow you to invest in a disciplined manner, giving you the benefit of systematic investment, which helps you tackle market volatility (if you remain invested in ULIPs for a long time). However, you can also pay the premiums annually, semi-annually, or as a single premium.

# Option of riders: You can also get additional life/health coverage or some added benefits by opting for riders. However, you will probably be required to pay a marginally higher premium.

# Liquidity: ULIPs are a long-term investment instrument with a lock-in period of five years. After the completion of this time period, you can surrender your policy without any additional charges. They also provide liquidity, and you can avail phased withdrawals.

# Transparency: This is one of the key features of ULIPs, as investors remain aware about the charges as well as where their money is invested. They can also switch between funds as per their requirement, and change the premium amount after a certain period. Such options are rarely available with other investment avenues, making ULIPs one of the most suitable products for investment for all types of investors.

Try an online unit linked plan like HDFC’s Life Click2Invest that offers you market-linked returns, charges you minimally, provides your family with valuable financial protection and best meets your investment needs.

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