Investment Plans 371 views August 28, 2021

A unit-linked insurance plan (ULIP) is arguably the best way to secure your future. The premium payable for the ULIP is divided into two parts. One part is meant to provide a life insurance cover to your dependents in case you die during the policy term. The other part gets invested in different financial instruments to ensure investment returns for you. At maturity, the ULIP will hand out the prevailing fund value and other payments (if any), regardless of whether you survive till that time or not. In case of your death, your nominee will receive such payouts.


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That said, the key lies in staying ahead of the curve. We mean to say, the investment returns have to be very high to meet the inflationary pressure that you might face years later. At the same time, don’t lose sight of your risk appetite. Else you will invest in the wrong instrument unknowingly and rue later. To help boost your investment returns from ULIPs, we have come with a few tips for you to read and implement in real-time.

Let’s Check the Tips for Better Investment Returns from ULIPs

Investments come with varying levels of risks and thus require you to show a disciplined approach. While that holds true, being inflexible while investing might leave you with a much shorter investment surplus years later. So, you need to do the balancing act to ace the investment challenge that lies ahead of you. Let’s discuss the tips to ensure the same in real-time.

Make the Most of Compounding Benefits

Investments when continued for a long time can rise beyond the expected numbers due to the ‘Power of Compounding’ effect. Long-term investments could lead to returns over returns, thereby raising the overall surplus amount. So, if you have chosen the right ULIP, stay invested through the ups and downs to generate the corpus required for a strong financial portfolio. In case you are chasing big goals like arranging funds for marriage and education, your ULIP should have maximum exposure to equities and for a long period. Equity investments can lead to double-digit returns over the long term, helping you achieve such goals with ease.

Choose the ULIP with Least Fund Management Charges

Unit-linked Insurance Plans give you a choice of funds to invest in. You can choose one or more funds from the list presented to you. The insurance company deducts fund management charges from the net asset value of the funds chosen by you. These charges account for a certain percentage of the fund value. The Insurance Regulatory and Development Authority of India (IRDAI) has stipulated that these charges can’t be more than 1.50% of the fund value. Even then, go for the ULIP that has even lesser charges so that you can earn more.

Assess Your Risk-taking Abilities Correctly

ULIPs invest in equities and debt instruments whose performance depends on various economic, political and social developments. Sometimes you could witness a fall in investment returns from ULIPs due to weak market developments. So, the risk appetite needs to be high when investing in a unit-linked insurance plan. More so when the ULIP that you choose invests predominantly in the high-risk, high-return proposition of equities.

In case your risk appetite is on the lower side, invest in ULIPs having maximum exposure to quality debt instruments. Debt instruments are assigned several ratings based on their solvency. Go for A-rated debt instruments that offer the maximum safety to your invested capital.

Be Flexible When Investing in ULIPs

Flexibility is the key to a successful investment journey and ULIPs are no exception. So, look to optimize your investments by switching between different fund options – equity and debt – as and when the time is opportune to do so.

If you have accumulated a corpus for the education and marriage of your kids through equity funds and are about to withdraw the sum, switch to debt instruments. That will ensure the safety of the corpus built through the years. However, if your ULIP is mostly exposed to debt instruments and the equity market is performing exceedingly well, no harm in switching some to the latter.

While some insurers offer unlimited free switches, others charge after some 6-8 instances. The tendency would then be to go for lifetime free switches. But you also need to look at their returns over the years. In case the ULIP, on which unlimited free switches are available, has performed poorly or below expectations, it’s better to avoid the same. Instead, pick the one that has performed well over time to maximize your earnings.

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