Unit Linked Insurance Plans are one of the most popular investment options. They offer a variety of benefits like investment, insurance, and tax-saving at the same time. There is a variety of ULIPs available in the market. In order to know how to choose the best ulip for yourself, here are a few things to keep in mind
A ULIP invests across debt and equity. Usually, a ULIP offers fund options that you can choose from. You should always go for a plan that offers maximum choice in this regard so that you have the freedom to customize as per your financial goals.
For example, Canara HSBC Oriental Bank of Commerce's Invest 4G offers 7 different fund options- Emerging Leaders Equity Fund, Equity II Fund, India Multi-Cap Equity Fund,Balanced Plus Fund, Growth Plus Fund,Liquid Fund, Debt Fund. You can choose to invest in any, all, or a combination of funds from amongst these. This also comes with a choice of 4 different portfolio management strategies- Systematic Transfer Option (STO), Auto Funds Rebalancing (AFR), Return Protector Option (RPO), and Safety Switch Option (SSO)
A lot of plans can be bought and managed online these days. Opt for such a ULIP so that you can save time, manage your investment conveniently, and eliminate agent charges. An online plan will mostly also offer the option of auto-deduction of premium from your bank account so you need not worry about that either
There are plenty of charges associated with a ULIP such as premium allocation charges, surrender charges, mortality charges, etc. When a considerable part of your premium is spent on these charges, you are left with lesser money to actually invest. Go for a plan with minimum charges
A ULIP can offer you flexibility in aspects other than fund selection as well. Go for a fund that gives you different premium payment options i.e. monthly, quarterly, half-yearly, and yearly
Canara HSBC Oriental Bank of Commerce's Invest 4G offers these options while also giving you three plan options to choose from- life option, life options with PFB, and whole of life option. It offers added flexibility in the form of a settlement option. You can choose to receive maturity benefits in instalments at a frequency chosen by you, over a maximum period of 5 years. You can also opt for complete withdrawal of Fund Value at any time during this period. This plan also offers switching and redirection between fund options, and partial withdrawals to meet contingencies.
While thinking about how to choose the best ULIP, you must not forget that a ULIP is basically an insurance plan with an investment component. It allows a minimum life cover of 10 times the annual premium. For example, if you have an annual premium of Rs.1 lakh, your minimum possible cover would be Rs.10 lakhs. Different plans offer different options in this regard as well, such as fund value, or a percentage of the premiums paid till death of policyholder.
Define life goals
Any investment, be it a ULIP or other insurance product, should be made keeping your financial goals and dreams in mind. These could be anything from taking an international trip to being ready to pay for your child's higher education in time. The amount required to fulfill your specific financial goal and the time in which you want to achieve it should all be taken into account while deciding on your investment horizon and fund allocations.
Your risk appetite should depend on your income, age, the dependents in your family, medical conditions in the family, etc. Usually, you can take greater risks when you are younger. If you are ready to do so, you can opt for a higher equity investment as it could give higher returns. If you want to stay safe, you can go for a debt-oriented investment. You could also go for a balanced fund to begin with
Research and compare
Research is always important before investing. Check the historical NAV (Net Asset Value) of the fund you are considering and evaluate its performance. Although the past performance does not necessarily signify future performance, it could help you set expectations for the fund. Run a background check of the insurer as well. See if they have a good solvency and claim settlement ratio so that you know that your money is in good hands.
These are the basics to be kept in mind while thinking about how to choose the best ULIP. There is always scope for more reading and more research, so ensure that homework is thorough before investing