Unit Linked Insurance Plans (ULIPs) are fast emerging as the most popular investment instrument, not only owing to their ability to provide investors with high returns but also because of their ability to provide coverage along with these returns. ULIPs act as both investment and insurance, thereby allowing policyholders to fulfill more than one function by purchasing them.
For instance, potential policyholders can purchase the Invest4G Plan, offered by Canara HSBC Oriental Bank of Commerce Life Insurance, which offers them the ability to choose between 7 different funds and 4 investment strategies, while also avail the Return of Mortality Charge under Benefit Option as part of their insurance policy.
However, with the plethora of options available in the market today, it is important to buy a ULIP that fits in with your individual requirements. There is no point in buying a ULIP which costs you more but only provides minimal coverage and generates more expense than returns. Thus, there are a few factors you must consider among your ULIP options before deciding to buy one. Read on to learn what these are.
1. Tax Savings:
Under the Income Tax Act, 1961, several investment instruments are eligible for tax savings through exemptions as well as deductions and other benefits. Make sure to understand the tax savings that are applicable on the instrument, before buying a ULIP. Ensure you buy the ULIP that offers you the most tax savings, as this will ensure you save the maximum amount and minimise your expenses and losses, if any.
2. Check Applicable Charges:
When you invest in a ULIP, it is important to understand the different charges that may occur. Many ULIPs may charge you for portfolio allocation, premium allocation, policy administration, mortality charge and even for fund management. Browse carefully and identify the ULIP that incurs the least cost. Opt for the ULIP that incurs the least charges as this way you can actually increase the amount meant for investment and for ensuring your insurance coverage.
3. Identify the Timeframe of your Investment:
There are different timeframes for investment, for each individual investor. Depending upon their age and other factors as well as their individual requirements, different investors will opt for a different timeframe within which they want their investment to show returns. A younger investor will want to invest for a longer timeframe as it is advisable to let their investment mature over a longer period of time. This will guarantee higher returns and will also be a low-risk investment. A long period investment will also help young investors save up for their retirement corpus, ensure coverage for their life and also save in terms of availing tax benefits. For older investors, it is better to invest for a shorter time frame as they might require the funds much earlier to meet short-term goals. Older investors have more responsibilities and cannot afford to let their funds stay locked up for long periods of time and thus, will prefer ULIPs with a shorter maturity period as they might require the amount gained through returns for meeting regular financial requirements.
4. Opt for the Maximum Sum Assured:
While investing in a ULIP, you can choose how much of your funds are invested in the market and how much is set aside as part of your insurance coverage. While investing more funds may or may not guarantee higher returns depending on market conditions and the type of securities you invest in, opting for the maximum sum assured will definitely guarantee you higher coverage. When you are going through the features of the product before making your purchase, understand how much is the maximum sum assured you will gain before investing in it.
5. Choose Investments According to your Risk Appetite:
With a ULIP, you can choose to invest in a range of funds. Investors with a higher risk appetite usually invest in equity funds, returns from which are dependent on market factors. However, investors with a lower risk appetite usually prefer investing in government securities which offer lesser but assured returns. It is important to pick the funds offered by the ULIP in accordance with your own risk. High risk investors usually invest for a longer period as compared to low-risk investors, and that is why it is important to identify your risk appetite and the timeframe for which you wish to invest.
There are several things you need to check for before purchasing a ULIP. By investing in the Invest4G Plan, offered by Canara HSBC Oriental Bank of Commerce Life Insurance, you can avail maximum flexibility during the investment period and easily switch between funds to earn maximum returns.