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How to Plan Your Long-Term Financial Goals with ULIP Investment Plan

How to Plan Your Long-Term Financial Goals with ULIP Investment Plan

ULIP Investment

Whether you have just received your first salary cheque or started a family, you always have plenty of aspirations and goals in life. No matter how organised you are with the money somehow your goals always beat your income. However, that is only until you define your goals, make savings plans and have ways to work towards it.

Organising Your Financial Goals

So the first thing about beating, or more appropriately, meeting your goals is that your need to organise your goals. Organising is only the first step of planning, so let’s not confuse this as planning financial goals.

Before you can plan, you need to sort out the goals into the ones which need planning and the ones which don’t. You can also refer to these goals as ‘long-term goals’ and ‘short-term goals’ and then prioritise before you start planning.

You can plan all the goals in your urgent important matrix, except the kitchen expenses. The best way to manage kitchen expenses is to follow a monthly budget. However, for the rest of the goals, you can plan, save and invest money.

Most important of the three types of goals you can plan for are the long-term goals. Thus, this is where most of your planning efforts will go.

The Long-Term Financial Goals

Which goals occupy your mind when you think of long-term goals; i.e. goals which are not urgent but important in your life? Here are a few which you can commonly find relevant:

  • Purchasing first house property (home-ownership)
  • Child’s higher education goal
  • Child’s marriage goal
  • Retirement goal

Of all the goals you can add to the list, the retirement goal remains an exception to the investment planning strategy. Thus, we should try to keep the retirement planning separate from other goals.

Planning for Long-Term Financial Goal

Before we get into the use of ULIPs, you should have a clear understanding of your financial goal. The simplest way to develop a clear vision for your goal is to define them in the following terms:

  • Expected time to the goal
  • The present cost of the goal and it’s the future value
  • Your current investments you can allocate towards this goal

For example, if you are defining the higher education goal for your child, it could be defined as – Accumulate Rs. 50 lakh in 15 years, with present allocation at Rs. 1 lakh.

Using ULIP for Your Financial Goal

Once you have defined your goal, you can start customizing a ULIP investment plan as per your needs. ULIPs have a lot of features you can use to your advantage while saving for your long-term goals:

ULIP to meet financial goals

Wealth Boosters for Long-Term Investors

ULIPs are excellent long-term investment plans, as the longer you stay invested, the more benefits the offer. Wealth boosters especially benefit investors who stick with the plan for longer than five years.

The insurer will allocate bonus units to your portfolio every few years, provided:

  • You have been investing continuously
  • Policy and investment tenure is more than five years

Thus, to maximize your benefit from ULIP investment, you can use a single ULIP investment plan to meet multiple goals as well.

For example, your child’s education goal is 15 years away, while the marriage goal would be 20 years away. You can add your wealth-building goal to the same plan and continue investing for another 10 years.

Just remember that ULIPs have a lock-in period of five years. So, better not add a goal that is less than five years away to the ULIP investment plan.

Portfolio Management Strategies in ULIP

If you want to invest in equity markets but do not feel confident if you can benefit from it, ULIPs have the perfect solution for you. Invest 4G ULIP plan from Canara HSBC OBC Life, offers four different portfolio strategies to help you with your equity investment.

These strategies offer you the following advantages:

  • Automatically manages your asset allocation without your intervention
  • Keep your investment risk from equity markets low
  • Take advantage of the market movements
  • Safeguard your returns from the equity market
  • Safeguard your portfolio value in the final years of your policy as you approach the goal

With Invest 4G plan you can choose at least two strategies to keep your intervention low in the investment plan.

Goal Protection & Life Cover in ULIP

Few goals like your child’s higher-education are too important for their future to be left to chance. For such goals, ULIP like Invest 4G plan provides additional protection. In case of your unfortunate demise before completing the goal, the insurer will:

  • Pay the life cover to your family immediately
  • Continue investing in your plan as you would have done, and pay the fund value at maturity to your family

This feature ensures that your child receives the money which you planned to provide for his/her higher education.

Tax Saving in ULIP Plans

ULIP is a life insurance plan and thus any premium you pay is eligible for deduction under section 80C up to the limits (current. Rs 1.5 lakhs). Also, any pay-out or withdrawal from the fund is exempt from tax under section 10(10)D.

But these exemptions are subject to the following conditions: The annual premium (investment) should be less than 10% of the life cover sum assured

Thus, while starting your new ULIP investment plan, you should ensure that the life cover in the policy is slightly higher than 10 times of your annual investment. This way, you can even deposit additional money in the future when possible, without incurring any tax liabilities.

Planning for Retirement Goal

The retirement plan takes precedence over all other financial goals. Whether you are married, have kids of your own or not, retirement is one goal you must prepare for. You can use ULIPs to achieve your retirement goal as well.

However, you should take care of the following when it comes to retirement goal:

  • You need to start investing for your retirement early even if the amount is very small
  • Since you are starting small, your investments will likely grow over time
  • It is better to use a retirement investment plan instead of ULIP in the early investment stage
  • Add ULIP to boost your retirement saving around the age of 30, when your income is high enough and you still have 20 to 30 years of investment period left

While traditional retirement solutions like NPS and PPF will allow incremental investments, ULIPs can boost your retirement corpus unlike any other. Plus, ULIP will also provide much-needed retirement safety to your spouse as well, in case anything happens to you.

Speak to an insurance specialist now!


In order to understand ULIP NAV, you first need to understand how ULIPs work. In ULIPs, a portion of premium from different investors is accumulated to create one investment corpus. This money is invested in several different market instruments. So to divide the returns properly among all the investors, the fund manager divides the net asset value in to small units with a specific face value. NAV is the per market share value of a fund. To better understand the definition of NAV, take a look at the formula below -

Net Asset Value = [Assets-(Liabilities + Expenses)] / Outstanding Units

It's not risky to invest in ULIP if you chose a safer path. Risk factor in ULIPs depends on the investment option you choose. If you are not okay with sharp movements, then choosing a low risk investment is a better idea. For people with high risk appetite, it's good to choose equity funds while risk-averse investors can go for debt funds.

You can opt for settlement option if you want to take your fund value in periodic installments. With the settlement option, you can get your maturity amount in installment as per the frequency chosen by you over a maximum period of 5 years. You can choose complete withdrawal of fund value at any point of time. Although, you will not get any life cover during this period.

ULIPs are life insurance products that provide paths to invest. And just like other investment option, there's no guaranteed investment return in a ULIP. Although, if you like taking risks and want to earn more returns on your investment, then opt for equity funds.

At the time of maturity of ULIP policy, you will get the fund value on your prevailing NAV. Fund value is the number of units of policy multiplied by NAV (net asset value).

Value of the fund = Total units of policy x NAV (Net Asset Value)

Well, discontinuing your premium payment will disrupt your savings as well as financial goals. In such case, you can approach your insurance company and ask for the revival of discontinued policy within the stipulated timelines. Also, you will have to pay all the unpaid premiums.

ULIP plan is a combination of investment and insurance. Thus, one must hold this plan for a duration of at least 10 years so as to get investment benefits out of it. As an early exit will have its own consequences. ULIPs have a lock-in-period of 5 years. Thus, you may surrender your policy before the completion of 5 years, but you will be paid only after the end of 5 years.

Generally, minimum lock-in period for ULIP is 5 consecutive policy years. During this time period, if the policyholder discontinues or surrenders the policy, then he/she will not able to receive any payouts. Withdrawals are only allowed at the end of the lock-in period. In addition to this, if you surrender your policy before the lock-in period ends, then you will have to pay surrender charges as well. Also, it is advisable not to exit your plan after the completion of 5 years of lock-in period, because if you stay invested for a longer duration it will help you reap better benefits.

The amount that you pay towards the Unit Linked Insurance Policy is eligible for tax deduction as per Section 80C of the Income Tax Act, 1961. This means that the premium amount paid will be deducted under section 80C from your taxable income up to a maximum limit, which is currently ₹1.5 Lakhs. However, the aggregate amount of deductions under section 80C, section 80CCC and 80CCD (1) shall not, in any case, exceed ₹1.5 Lakhs. Also, upon the maturity of the policy, the payout amount you receive will be exempt from income tax, subject to the applicable provisions of Section 10(10D) of the Income Tax Act, 1961.

Here’re the following major benefits of buying ULIP

1. Tax Benefits – It helps you to reduce tax liabilities. This means you are liable to enjoy tax benefits on the premiums paid towards the policy as per Section 80C of the Income Tax Act.

2. Long-term growth– One of the major benefits of buying a ULIP plan is that it offers long-term benefits. ULIPs come with a lock-in period of 5 years which will keep you invested for a longer period.

3. Dual benefits – ULIPs not only offer life coverage but also come with a wide range of investment funds that will help you earn great returns. This includes balanced funds, debt funds or equity funds. You can invest in any of them depending on your need and risk appetite.

4. Flexibility – It gives you the flexibility to switch between funds basis your risk appetite. You could select multiple funds and different investment strategies.

5. Partial withdrawal option – It allows you to make partial withdrawal in case of any uncalled medical emergency or contingency after completion of lock-in period.

ULIP is a perfect investment option if you are looking for long term wealth creation. It could be buying your own house, a new car, going on a long vacation, or your child’s higher education or marriage, ULIP helps you to meet all your long-term financial goals. Moreover, it comes with a lock-in period of 5 years which keep you invested for a longer period and helps you earn better returns. The lock-in period is calculated from the date when the policy is issued.

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