In contrast to a term insurance policy, a Unit Linked Insurance Plan (ULIP Plan) is a product issued by insurance companies that provides financial supporters with both insurance and investment under a single integrated plan. An individual may secure their family’s future with the benefits provided by the ULIP plan and investment segments, while also ensuring reserve funds to accomplish their long-term financial goals.
An individual investing in ULIP, must pay a premium to the insurer. The ULIP fee is then passed on to the insurance and investment sectors. One might have some concerns regarding how it works, is it safe and how will it be beneficial to opt for a ULIP plan. Because of rumors and misconceptions, it is hard to accept the advantages of the ULIP policy.
Breaking Misconceptions Related To ULIP Plans
Many believe that ULIP is not a suitable plan. These misconceptions and myths need to be cleared before one chooses the best ulip plan in India.
Myth 1: ULIP is not an actually a good choice for investment
Reality: An individual has to put money into a ULIP and pay the premium for the year. The premium paid allows the policyholder to invest in either an equity fund or a debt fund (or both) while also ensuring that their friends and family are covered. ULIP is a flexible and customized option it is a suitable option for people looking for investment for more than 10 years and thus it can be the best choice for investment.
Myth 2: One needs about 3 years lock-in period for ULIP
Reality: In 2010, the IRDA revised its rules and regulations and made the lock-in period of the ULIP plan from 3 to 5 years. As per new regulations, this is the most suitable investment plan for candidates looking for options that could yield an assured high sum amount with fewer initial charges. There is a possibility of higher returns with it.
Myth 3: It includes huge charges at a low investment fund
Reality: It does include some charges like premium allocation charges imply that a portion of the premium is used to offset the insurer’s merchant, endorsement, clinical, and other costs, etc once but after the revised regulation, the charges have been reduced. It is ensured that charges are equally divided over the years. It is thus important to choose the best deal for ULIP plans.
Myth 4: ULIP is an expensive investment option that locks funds
Reality: Yes, the ULIP plan involves some sorts of charges, but this is evenly distributed in terms of 5 years. It is an option that involves a long-term investment with a better return. It offers complete transparency for the money you invest. It does lock amount for a fixed tenure but in case the policyholder wishes to withdraw any amount for an emergency, they get a facility to partially withdraw from ULIP policy. In case one thinks that his amount will be stuck, one gets the flexibility to switch the plan. One can further invest the amount in some other investment plan with a better return.
Myth 5: It is not possible to switch from ULIP plan to other
Reality: One can switch units between his investment funds depending on the risk tolerance and payment choices. This aspect of fund investing preserves the earnings from market fluctuations with the help of shielding. There are different rules for switching ULIP and the charges may vary depending upon the provider and the policy details. Some insurance companies do allow candidates to conduct multiple switches of this plan in a year.
The Insurance Regulatory and Development Authority of India oversees ULIPs, which are among the safest investments available. They not only combine the benefits of insurance and investing, but they also allow the policyholder to choose the level of equity openness based on their risk appetite.
Before one wish to invest in best ulip plan in India, it is important to clear all misconception one had about this plan. There are many companies that offer different ULIP plans, and it is always better to choose the best ulip plan in India that comes with better deals and facilities. Insurance companies offer a variety of ULIPS which can be customized based on individual needs.