How to identify the best ULIP plan in India?

How to identify the best ULIP plan in India?

Investment plans are well-established universal assets, used across various income brackets. Owing to their simple structure and assured coverage amounts that fixate on supporting one’s future, many new prospective policyholders gravitate towards them. Insurance is another necessity that is integral for financial protection of one’s dependents and future in the face of unforeseen circumstances.

New Delhi: Investment plans are well-established universal assets, used across various income brackets. Owing to their simple structure and assured coverage amounts that fixate on supporting one’s future, many new prospective policyholders gravitate towards them. Insurance is another necessity that is integral for financial protection of one’s dependents and future in the face of unforeseen circumstances.

However, since the insurance market is replete with several plans to choose from, with additional features one can add the process of choosing one plan can become intimidating. Investors are often on the lookout for investment or insurance solutions that are well-rounded and serve many purposes with multiple benefits. A plan that can aid one’s investment and insurance is often preferred as maintaining these separately can be tedious. Therefore, in an effort to amalgamate these two essentials, investment providers introduced ULIP plans.

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Now that you know what is ULIP, let’s find out how to choose one.

A Unit Linked Insurance Plan is an investment-cum-insurance instrument that is driven towards fulfilling a dual purpose for the policyholder. ULIP plans are maintained by premiums paid by investors, the frequency of these payments can be monthly or annual. The basic feature of a ULIP plan is that it uses the paid premium and allocates a part of it towards investments and the rest towards life insurance coverage. These investments are generally market-linked, making them moderately risky. However, an investor may choose between different investment options as per their investment portfolio requirements and risk appetites.

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The units stand for the allocated units to the investor which stand for their market-linked investments, similar to equity mutual finds. These units are converted into a corpus on the basis of the NAV that is allocated to them at the time of conversion. 

Now that the fundamentals of ULIP plans have been established, let us look at how one can pick the best ULIP plan in India that is suited to their needs:

1. Insurance Objectives: Before investing in ULIP plans, an investor should duly understand the features of their plan. ULIP plans are generally long-term insurance plans, therefore they are beneficial to potential policyholders seeking adequate coverage for their dependents. Foreseeable dependents such as children and spouses should be considered before picking ULIP plans. 

2. Investment Goals: The best ULIP plans in India are built on the assurance of sizeable returns with moderate risk as compared to direct equities. Therefore, a ULIP plan can be an ideal solution for investors who have large expenses or monetary commitments in the future such as a child’s higher education, their marriage, travel and retirement. ULIP plans allow for a steady capital accumulation for future use. 

3. Understand Personal Goals: An investor will be able to pick the best ULIP in India for their requirements if they have clarity in regards to their investment portfolio and horizons. 

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4. Gauge Risk Appetite: Since ULIP plans are often investments that are market-linked, they are subject to market fluctuations which influence the NAV. Even though debt and equity mutual funds are moderately risky, fluctuations may influence their projected returns. If an investor is risk averse, they can choose investment options within the ULIP that are low-risk or according to their risk appetite. 

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5. Compare Plans: As goes for any investment plan, investing in a ULIP plan should also be done after adequate market research. Since there are a variety of ULIP plans in the market, which have their own provisions as per their provider; an investor should compare across all plans to find the best ULIP plan in India for their needs. 

Also Read: Your ULIP FAQs Answered in Detail

Investing in an ULIP plan can be a holistic investment and insurance solution for an investor, therefore before investing one should have the following checklist in place to help them make the final decision:

ULIP Plan Costs: ULIP plans often have additional costs that may not be apparent at the time of choosing a plan, therefore one should consider costs such as premium allocations fees, management fees, initial charges, surrender charges and service charges at the time of looking at ULIP plans. 

Plan Performance: Since ULIP plans offer market-linked capital growth solutions such as investing in debt and equity mutual funds, an investor should keep track of the fund and its performance in the market in the past and compare before committing. 

Compare: As aforementioned, an investor should do adequate market research before selecting a ULIP plans with their respective features and benefits. 

Exit and Entry Charges: Many investment plans have lock-in periods or entry and exist charges that may be levied from an investor. Therefore, an investor should check for these charges within the plan in the event they have limited investment horizon. 

Read Plan Details: The first and most important step to investing in any investment or insurance plan is to carefully read all requisites, costs, fund choices, insurance coverage metrics, projected returns and any additional charges mentioned within the ULIP plan. One should carefully read through all these details so they are prepared for any costs or liabilities that may arise at the time of investment.

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first published:Oct. 26, 2021, 3:19 p.m.

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