A ULIP Plan provides you protection, return on investment & tax saving benefits. It’s one of the best ways to meet all your future needs & safeguard the financial wellbeing of your family whilst saving a good amount of money on tax deductions.
Therefore, if you are thinking of investing in a ULIP, you are making a wise decision. However, with so many different plans available to you, choosing the right one for your needs is of paramount importance. This article will highlight 6 major points you need to look out for while choosing between ULIPs
1. First Take A Look At The Charges Involved
Charges eat into the fund value of your ULIP. Initially, ULIPs had a reputation of levying high premium allocation charges which could be as high as 20%. However, the IRDAI has stepped-in and capped of these charges at 1.35% per annum. You should also look at the extent of other charges such as fund management charges, switching charges, etc
2. The Best ULIP Plan Will Give You Different Premium Payment Options
When selecting a ULIP, be sure to look for a plan that allows you different premium payment charges. Good plans offer you three options, i.e. single, limited & regular. With a single premium payment charge, you have to pay one single premium and nothing else. Limited allows you to pay premiums for a certain number of years that could be 5, 7 or 10 years. Regular, as the name suggest refers to monthly premium payments.
3. Number Of Free Switches
The best ULIP plan will allow you a good amount of switches. This gives you the freedom to rotate your funds between debt & equity linked funds without paying any charges. The more free switches, the more liberty you have to operate your plan according to your market view, time horizon, and risk appetite.
6 Things To Selecting The Best ULIP Plan
4. Loyalty Bonuses & Fund Boosters.
Look for a plan that provides your loyalty bonuses & fund boosters in addition to the returns your money earns. Some plans offer a percentage of your annualized premium every 5 years after the 10th year of your plan. These percentages keep on increasing at every interval and some insurer can give you up to 30% of your annualized premium as a loyalty benefits.
Some ULIPs also have fund boosters that add to the Regular Premium Fund Value at maturity. Fund booster can give you up to 90% of one annualized premium at the end the policy tenure.
5. The Coverage Amount:
Let’s not forget that the best ULIP plan should also buy you the coverage you need. Most ULIPs provide coverage amount that is a multiple of the annualized premium amount. If you are looking for a pure investment opportunity, then opt for a lower sum assured as higher the sum assured, the higher the mortality charges.
But if insurance is just as important as the investment component, then look for a plan that provides you a good amount of coverage. Preferably, you should look for a plan that provides you more option when it comes to the death benefit. For example, some plans offer 105% of the premium paid till date or the sum assured, whichever is higher.
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