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.
Conventional investment avenues such as fixed and recurring deposits often fail to provide a higher return, whereas market-linked investment tools offering high returns come with equally high market risk. Finding a financial product that ensures comparatively higher returns and satisfies the low-risk appetite of investor often become a challenge.
ULIPs or Unit Linked Insurance Plans become an ideal option to go ahead with for such investors. These plans combine the security of insurance and wealth growth that comes with investment. The premium paid for a ULIP is divided into two parts. The first part goes towards forming a life insurance corpus, while the second is invested into chosen debt or equity funds to help you reap financial benefits.
Are you still wondering why should I invest in ULIPs? If yes, continue reading this piece to better understand the reasons to invest in ULIPs.
Here are some of the primary reasons why you should choose ULIP as your go-to investment option over others:
The first point to the answer of the question - why I should invest in ULIP – is, it provides the benefit of two financial products in one.
ULIPs provide insurance cover which takes care of the financial interest of the policyholder’s dependents in case of an unfortunate event. A death benefit is offered to the family members or dependents of the insured as per the terms of the policy.
In addition to that, it provides consistent returns on investment which can be withdrawn after the policy matures or as per the schedule finalised as per the terms of the plan. A pre-decided portion of the premium is invested in the chosen investment instrument of the policyholder (equity or debt). This ideal mixture of investment and insurance offered by ULIPs helps you accomplish your financial targets in the long run.
ULIPs also allow the policyholders to increase their investment amount according to their convenience. With the top-up facility offered by ULIPs, you can invest an additional amount in your existing policy. If your current fund is performing well, you can easily invest extra money on top of the existing premium amount to facilitate the fund's growth.
Another reason behind investing in ULIPs is that they provide you with the option to switch funds and redesign the portfolio.
This option allows the policyholder to alter the ratio of their investment exposure according to their risk profile and the performance of the funds. Moreover, the amount allocated to the investment instruments can be changed depending on the investor's risk appetite. The switching facility of ULIP allows you to shift your investment amount partially or totally from one fund to another without extra charges.
ULIPs offer decent returns at lower market risk. Moreover, ULIPs invest the amount in different asset categories and hence create a diverse portfolio for the policyholder. The returns received on ULIPs are quite better than the returns one may receive with another investment venture with similar risk levels.
ULIP can be a great investment solution as it offers variety. Unlike your regular investment plans, this financial product offers different schemes designed to suit variating investment appetites of different investors. Typically, there are three categories of ULIP, these are -
Investors can pick any portfolio they see fit as per their requirements.
One of the main reasons to invest in ULIPs is the long-term benefits they offer. Since the investment portfolio is linked to a term insurance plan, you will probably end up investing a substantial amount in the investment portion of the plan depending on the tenure. Hence, the return available at the time of maturity is quite significant. Since a part of the premium amount is regularly invested to build a corpus, you can also expect your dependent to receive a substantial death benefits in the event of an unfortunate event.
Hopefully, you found the answer to your question - why I should invest in ULIPs. However, it is essential to make sure that you invest your hard-earned money in legible investment plans. Before going ahead, check the policy terms and conditions and resolve any queries that you have about the plan. Talk to investment experts at Policybazaar UAE and choose the right ULIP to start your investment journey.
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