Investment Plans 218 views October 27, 2021

Unit-linked insurance plans (ULIPs) look to create wealth by putting your money i.e. premium in various financial instruments such as stocks, bonds, etc. Investments in equities can earn you way more than you could imagine if done properly. It would most likely suit the ones who love taking investment risks for high returns. Whereas the investment in debt instruments through ULIPs ensures conservative returns and suits investors with a low-risk appetite. All you need to do is choose the right plan based on your goals and risk appetite. To top it all, ULIPs come with top-notch flexibility by redirecting your premiums, switching your money from one fund to another, doing portfolio rebalancing and using other means to keep you ahead financially. Let’s discuss these features one after another.

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Benefits to Have with the Premium Redirection Feature of ULIPs

Premium redirection is a feature by which you can change the allocation of upcoming premiums to the funds you want. The changing market dynamics might prompt you to alter the direction of premiums within your chosen funds. For example, you are allocating 90% to an equity fund and 10% to a debt fund. If the debt market performs outstandingly years after, you might think of increasing the allocation to debt by say 20%. In that case, the allocation of debt and equity funds would become 30:70. Not only the performance of a particular market segment but even your changing risk appetite influence your decision of changing the premium allocation within unit-linked insurance funds.

Switching Strategy Comes to Great Use Amid Market Volatility

Switching is a unique aspect that helps you move your investment from one fund to another to gain handsomely from the market volatility. It might sound similar to premium redirection but the difference remains between the two. Premium redirection does not change the existing composition of your investment portfolio that switching does. The redirection feature only decides the funds that your premium will purchase.

Portfolio Rebalancing Strategy of ULIPs Ensures a Top-notch Investment Portfolio

There’s no denying the investment risks involved in ULIPs. But the rebalancing strategy helps create a stable investment portfolio while making the most of market opportunities available. If you choose this option, your portfolio will rebalance automatically across the ULIP funds in the proportion as chosen by you every three months.

Loyalty Additions – A Reward for Staying Invested Through ULIPs

Insurance companies also offer loyalty additions that mean the addition of extra units to your linked funds. Getting these units doesn’t require extra premium payment. Instead, it’s a gesture shown by the companies for staying with them. These additions, which come at regular intervals from a certain point of your policy term, account for a certain percentage of the average fund value of certain policy anniversaries. All it takes is a spotless premium payment record.

Wealth Boosters Make ULIP Investments Attractive

Insurers also offer wealth boosters by allocating additional units to your funds at specified policy intervals. The payout comes only when you pay all the due premiums. Like loyalty additions, wealth boosters too account for a certain percentage of the average policy of certain policy anniversaries.

Note – Market conditions dictate loyalty additions and wealth boosters. 

Option to Change the Premium Payment Term

Flexible offerings like having the option to change the premium payment term and having maturity payouts in installments only increase the customer base of ULIPs. After paying the premium for a few years, the insurer can change your premium payment term on your request. Whereas you can get the maturity payout at any of the monthly, quarterly, half-yearly or yearly installments.

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