5 Frequently Asked Questions Regarding ULIPs
A unit-linked insurance plan (ULIP), which mixes coverage and investment into a single product, is an excellent form of financing for consumers seeking both life cover and long-term wealth accumulation. ULIPs had recently gained tremendous popularity due to their three-fold benefits of coverage, income, and tax savings. Before purchasing ULIPs, purchasers have a number of questions on their minds.
For people searching for both protection and investment, ULIPs are a wise financial choice.
- They put their money into a range of risky funds.
- A Lock-in term of five years is required.
- Long-term investment pays off.
5 Frequently Asked Questions Regarding ULIPs
Below are 5 frequently asked questions regarding ULIPs you must know to invest wisely:
What Distinguishes ULIPs From Other Types Of Insurance?
A portion of your policy premium is used to purchase life insurance, while the remainder is invested in funds of your choosing to create higher returns.
Is it possible for me to invest just in mutual funds that invest in stocks?
No. Apart from equities funds, you can put your money into debt and balanced funds. This allows you to invest based on the level of risk you're prepared to accept, as well as take advantage of market swings to increase your capital.
What Are The Costs Associated With A ULIP?
The following is a list of the various fees that you must pay when investing in a ULIP:
- The premium allocation charge goes toward the assurer's underwriting, medical fees, and other costs associated with your life insurance.
- The costs of providing you with life insurance include mortality fees.
- Before the NAV of a ULIP's funds is computed, fund management charges are deducted.
- Surrender charges apply if you leave your insurance before 5 years and cash in the units you've accrued.
- For managing the ULIP, there are fees for policy management.
If I Am Risk-Averse, Can I Minimize My Exposure To Equities?
Yes, if you are not comfortable with a bigger risk, you can easily convert from equities funds to debt funds. You can also change funds to take advantage of market fluctuations or if you are unhappy with a fund's performance. Furthermore, the premium redirection feature allows you to manage the money from future premiums into the funds of your choice, whether they are debt, equity, or hybrid. This allows you to keep a tight grip on your money while still achieving your objectives.
What If I Decide To Cancel My ULIP Before The 5-Year Lock-In Period Ends?
You lose life insurance and miss out on the opportunity to build wealth for your varied life goals when you surrender your ULIP. Surrendering within the statutory 5-year lock-in term might cost a lot of money, and you'll only receive your money back after 5 years. Your assurer would assess a discontinuance fee and transfer the remaining fund value to a discontinued policy (DP) fund, where it would earn interest.
You get a 15-day free-look period for your chosen ULIP, exactly like with other life insurance policies, during which you can return it to your assurer if you are not satisfied.
What If I Wish To Cancel My Policy Before The Five-Year Period Has Passed?
The assurer is charged a discontinuance fee, and the fund value accumulated until the time of surrender is transferred to a discontinued policy fund, where it receives interest. The money is returned to you after 5 years. The life insurance policy becomes void, and you lose out on the possibility to build money through ULIPs.
Conclusion
A ULIP (Unit-Linked Insurance Plan) combines two benefits into a single package. ULIPs are a popular investment tool due to the benefit of life insurance coverage and the ability to invest in equity, debt, or balanced funds to obtain long-term returns. ULIPs outperform most other investment options when it comes to returns. They can assist you with securing the financial future of your family or helping you achieve specific life objectives. ULIPs, on the other hand, have a slew of queries.
Also read: What Are The Different ULIP Charges That You Must Know About?
How Does ULIP Helps In Long-Term Wealth Creation?
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
