ULIPs and mutual funds are two popular yet distinct investment avenues, each coming with its unique set of benefits and drawbacks. Know which one is better for your individual needs and preferences.
Choosing between pure investment and insurance options can be tricky, especially for sole breadwinners with multiple dependents. Where securing the future of their dependents with a good term life plan is important on one hand, creating wealth takes precedence on the other. This makes it important for all to find the sweet spot between investment and insurance to cover both bases ideally.
The easiest way to strike a balance between these two is through ULIP or Unit Linked Insurance Plans. ULIPs are considered one of the best investment instruments in the UAE and for good reasons too. Understanding the advantages of a ULIP plan will make it clear why these plans are so popular among the residents of the UAE.
A Unit Linked Insurance Plan (ULIP) is an amalgamation of investment and insurance. For a ULIP insurance plan, the policyholder must pay a monthly or annual premium.
One part of the paid premium amount is sent towards the life insurance cover while the other is utilised for investment. The dedicated premium amount is invested in debts, equities or hybrid funds. One of the major benefits of ULIP plans is that your money is invested in a mixed investment portfolio that helps in reaping decent returns.
There are several reasons why you should choose to invest in ULIP insurance plans. Here are some of the prominent ones –
A significant advantage of a ULIP plan is that they offer the flexibility to choose the investment venture as well as the portion of the premium amount to be invested. Choosing a ULIP allows you to invest in different ventures according to your risk appetite. You can access various high, medium and low-risk investment options through other funds within the same investment plan. So, you can choose the most suitable plan for you. You can increase your investment using the top-up facility or change the portfolio based on the current requirements. It is easy to meet your financial targets with ULIPs.
Another important advantage of a ULIP is the transparency offered by the providers. The value of an investment, the expected date for returns, the fee structure, the policy's tenure and other essential details regarding the plan are shared with you before you purchase it. You can easily gain a proper understanding of the product you are investing your money into. In addition to that, a quarterly investment portfolio change option and the annual account statement are provided to help you stay updated about your investment status.
You can make a partial withdrawal from your ULIP investment in case of emergencies. However, some limitations may apply to the money withdrawal or liquidity facility of your ULIP. For example, you can only withdraw money following the lock-in period. So, make sure you check out all terms and conditions before finalising the investment.
One of the most important advantages of a ULIP plan is that they help in developing regular saving habit. When you pay a regular premium towards the investment part of your ULIP, you get into the habit of savings and investing a certain portion of your income regularly. Regular savings are crucial to building an appropriate corpus to lead a carefree and comfortable life after retirement.
Managed by a dedicated portfolio manager, ULIP investments are one of the best investment options for beginners. You, as an investor, are not required to monitor the market regularly to gain decent returns. You are also allowed to switch funds if required. You can choose your investment portfolio according to your risk appetite and simultaneously reap the benefits of a term life insurance cover.
You can earn significant returns from your ULIP without directly getting involved with portfolio management. This also means that you can eliminate the impact of a wrongly managed portfolio if you are not well-versed with market forces or are unaware of the management tricks.
Now that you are aware of the top advantages of a ULIP plan, you can easily select a plan that will suit your requirements and help you meet your financial goals ideally. ULIPs are an excellent financial instrument to achieve long-term investment goals. Nonetheless, before you proceed with purchasing your insurance-cum-investment plan, do not forget to check the policy details and associated terms and conditions to make an informed decision. You can also get help from our in-house insurance experts to choose the right ULIP for your requirements.