By Akshay Dhand
With changing lifestyles and evolution of life goals, it has become important to re-evaluate investment strategies and create a financial portfolio that supports modern aspirations. This also entails using money to earn returns in addition to traditional savings.
Unit Linked Investment Plans (Ulips) are life insurance plans, which offer the dual benefits of life cover and investments. The protection element is the underlying insurance cover while the investment element is that portion of the premium that is invested by the life insurance company on behalf of the policyholder as per customer’s fund choices. Being a long-term savings instrument, Ulip provides benefits of compounding and wealth generation depending upon the fund options chosen by the policyholder.
Investing in equity and debt
The premiums paid by the policyholder are invested in various funds across equity and debt instruments and part of the premium additionally goes into providing life cover. Equity funds of Ulips may be able to take advantage of market fluctuations and also combat inflationary pressures.
Investing in regular equity through Ulips helps in mitigating the impact of losses due to market volatility. They offer the flexibility to switch between equity and debt funds as per the risk appetite of the policyholder. Hence, compared to other investment avenues,
Ulips help build a diversified set of investments and flexibility to align with life goals.
Ulips are special types of investment that can be used to meet long-term financial objectives and protect loved ones’ futures. As it necessitates regular investments, it promotes disciplined investing. A long-term plan like Ulip gives a
better chance of availing compounding benefits. One should invest in Ulip plans for at least 10 to 15 years or more to meet the target of the high corpus.
Automatic rebalancing
The funds underlying Ulips are managed by a group of in-house fund managers and the policyholder has to select a fund based on the returns expected and risk appetite. Besides the funds, there are various investment management options for the policyholder to choose from, such as those in which the funds are automatically rebalanced as per the objective of the policyholder and hence the policyholder does not have to track and time the market.
Ulips provide the opportunity to create wealth for the future through disciplined and periodic investment into different funds over a tenure aligned with the policyholder’s future financial goals.
The writer is appointed actuary, Canara HSBC Life Insurance.
LONG-TERM BENEFITS
n A long-term plan like Ulip gives a better chance of availing compounding benefits
n The premiums are invested across various funds in equity and debt instruments
n A part of the premium goes into providing the policyholder life cover