“Being adequately informed regarding your options when investing in ULIP allows you the freedom to choose what is best for your family and secure their future. “

Strong financial planning is an integral step to secure your future financially and meet long-term goals in terms of business and holidays. In order to secure you and your family's future, investing in insurance coverage is needed. Alongside, to achieve long-term business or pleasure-related future goals investing in a promising and high-return investment plan is necessary. A hybrid plan that will allow you to obtain a life insurance cover and chances of high returns is ULIP. 

Before diving in to invest in ULIP, let's look at what it is, how it works, the risk factors involved, and the best available in the market. 

What is ULIP?

ULIP is the abbreviation of Unit Linked Insurance Plan. This plan is a combination of insurance cover and investment opportunities to help an individual create a stable future for their future goals and aspirations. The premium amounts can be paid either monthly or annually. Here, one part of the premium you pay provides you with the life insurance cover. The remaining part of the premium goes into the market for investing. 

As an individual investing in ULIP, you must know that the investments made through ULIP are subjected to risks associated with the capital market. So it is necessary to make an informed decision, always understand your current and future needs and how much risk you'll be able to take with your hard-earned income.

If you're wondering how to save tax with ULIP, be assured as it also offers tax benefits where the insured individual can avail it. The premium paid for the plan and the return you get on the investment will be tax exempted as per section 80(C) and 10(10D) of the Income Tax Act 1961. 

The plans under ULIP are made according to realistic financial objectives like: 

• wealth creation 

• retirement planning and

• children's education

Example of why you would need a type of ULIP Plan

The dropout rates in India in secondary education are on the rise. Despite everything, a significant number of children drop out of school due to financial difficulties faced by their families, amongst other reasons. It can be due to an unfortunate situation like the demise of parents, and in their absence, the children, despite their willingness to learn are unable to continue their education. Therefore, those individuals looking to secure their children's future can opt for their children's education plan. 

What are the features of ULIP?

• Liberty to choose investment type

Mainly there are three types of funds that are to be had in ULIP: balanced, debt, and equity funds. Depending upon your investment objective and how willing you are to take the risk, you can choose any of the three types of funds. Equity funds are more suited to those insured individuals who wish high returns on their investment and are willing to take risks, and debt funds are recommended to those who are hesitant to take the risk and would like stable returns.

• Flexibility to switch between funds during the term

The insured individual is allowed flexibility to switch between funds. It means the insurance holder can switch between equity and debt funds anytime they want. Especially when they see the capital market is at risk and do not want to invest in it anymore. It allows the insurance holder to not part with the plan yet avoid high-risk situations.

• Liquidity is available

ULIP comes with a lock-in period of 5 years to allow the insurance holder to make partial withdrawals for immediate expenses. So alongside, long-term goals it can help you achieve short-term goals too as it offers liquidity for better help of the insurance holders.

What are the advantages of ULIP?

• Protects your family

Being high on investment, the ULIP plan still proves to be a life-saving insurance cover where your family is protected financially in your absence too. Therefore, the return on investment is not the only reward you receive, but there's also security of your family and loved ones besides the returns.

• High on transparency

All the charges you need to pay under ULIP are always presented before investing. There are no hidden charges and there is 100% transparency regarding what you're paying for. In addition, you will receive regular updates about the fund's performance and all the charges that are levied for your own assurance.

• Reasonable surrender charges

If, at any time, you feel like the plan is not adding any value to your overall financial portfolio you are free to opt out of the plan by paying the surrender charges within the first five years of the policy. The surrender charges in the ULIP plan are reasonably low, so parting with the plan will just cost a few pennies and not burn a hole in your pocket.