ULIPs are popular among investors. It serves the dual purpose of insurance and wealth building. This is the reason all insurance companies have their own ULIPs to cater to different investors need. This is why IRDA has in the recent past has amended the ULIP rules. But so many ULIPs are the cause of concerns for the investors to choose the best ULIPs.
“A market is never saturated with a good product, but it is very quickly saturated with a bad one.” Henry Ford
Here we present some of the elements which you need to keep in mind while selecting the ULIP.
ULIP buying option should be easy and online but it should not be the criteria to select the best ULIP. Ease is necessary but not sufficient. Features which fulfill investors need shall be the selection criteria.
Here I present 8 key criteria you need to check while selecting best-suited ULIP
Longer tenure is good for any investments. Investments multiply at faster as the time passes. The cumulative impact of investments gives its value after certain years.
Suppose rupees one lakh becomes rupees two lakhs in 5 years. Two lakhs becomes 4 lakhs in next 5 years and 4 lakhs becomes 8 lakhs in next 5 years and 8 lakhs becomes 16 lakhs in the next 5 years.
The money is doubling in every 5 years but in the long run, larger corpus doubles. That is the advantage of long-term term investments.
Longer term ULIP is also better for insurance purpose as life cover remains available for a longer tenure.
Therefore ULIP which offers a longer term of investments is better in all aspects.
Premium Paying Term
Premium paying terms can be less than the policy term. Some ULIPs offers 5 years of premium paying terms for 20 years policy.
ULIP which offers flexibility in premium paying term as per the investors’ capacity and need are preferred choice.
For regular premium payment flexibility of paying monthly, quarterly, half-yearly, and annual premium are another aspect of investor focussed plan.
This is crucial. ULIP fund selection options should be wide enough to cater to the need of all categories of investors.
These funds are equity, hybrid i.e. equity, and bonds, money market funds, balanced funds.
In the equity category also there should be a choice of large-cap, Mid Caps, and small caps.
This way most categories of investors should be able to participate based on their risk appetite and preferred time horizon.
In order to encourage regular investment, some insurance companies invest additional contribution in the ULIP in addition to the investment made by the investors. This boosts the investment corpus.
Look for similar such features which is beneficial for the investors.
IRDA regulates maximum charge which can be levied by ULIPs. There are about 10 types of charges which are deducted from your ULIP corpus.
Some companies do not levy all 10 charges. Check out the charges levied by the company. Lesser charges enhance the value of your investments.
Fund switching is an important feature of ULIP. This helps the investors to adjust their risk and investment appetite.
But this fund switching is chargeable for some ULIPs. Some companies allow a limited number of annual switch free and then every switch is chargeable. & some companies allow unlimited switches during the tenure of the tenure.
Check this feature while evaluating the ULIPs.
This is also an important feature to compare. Some companies pay the sum assured. Some companies pay the fund value.
There are companies which pay higher of the same assured, fund value or 105% of the premium paid.
Evaluate the options. Flexibility & higher payout is in your interest.
IRDA allows partial withdrawal after an initial 5 years of the lock-in period. Check out the partial withdrawal term of the policy you are evaluating.
How many partial withdrawals are possible? What are the charges if any per withdrawals?
“When the product is right, you don’t have to be a great Marketer.” Lee Iacocca
These are some of the key elements based on which best ULIP plans are evaluated. So next time when you decided to invest in ULIP, you know what to look for.