A ULIP is a comprehensive plan that offers you both savings as well as protection. Under a ULIP plan, you will receive the benefits of both life insurance and investment. By buying a ULIP plan, you can avail substantial profits on life insurance plans while also benefiting from tax savings. As per the current market and investing experts, ULIP plans are the most popular investment alternatives.
Before you go ahead and learn how to invest in a ULIP plan, you must understand what ULIP meaning, how they actually work, and why they are so popular among investors.
What is the meaning of ULIP?
A Unit Linked Insurance Plan (ULIP) is basically a type of life insurance plan that not only provides you with the protection of life insurance but also helps you avail investment profits. When you buy a ULIP plan, some portion of the money is utilized for life insurance, and the rest amount goes to market-linked security options such as equities, debt, or a mix of both.
You will be allotted certain units on the basis of your investment percentage in a common pool. There will be a net asset value (NAV) of these investment units that will be evaluated on a daily basis. However, you must note that the NAV often fluctuates as per the market.
If you want to limit your risk, you must diversify your ULIP assets in such a way that the price of the average NAV rises with time.
Top ULIP Plans in India in 2022
Are you looking to invest in the best ULIP plan?
Here is the list of the top ULIP plans available in India in 2022:
1. Canara HSBC Life Insurance – Invest 4G
Canara HSBC Life Insurance – Invest 4G is a unique type of life insurance financial plan that can be adapted to an individual’s specific objectives and changing needs. This unit-linked individual life insurance and investment plan includes portfolio management options and possibilities, which enable you to choose the level of protection that best suits your requirements while also preparing for your long-term goals.
2. ICICI Pru Signature Plan
This investment portfolio can help you raise your income while also protecting your family’s finances. Regular disbursements are included in the plan, allowing you to realise the advantages of your insurance on a regular basis. This plan has no premium allocation expenses.
3. HDFC Life Click 2 Wealth
HDFC Life Click 2 Wealth is a non-participating unit-linked life insurance plan that provides you and your family with business earnings, reasonable costs, and critical economic protection.
How is ULIP Different From Other Insurance Plans?
You will have various objectives, duties, and desires in life. Many of them need financial assistance, while some may occur as a result of financial well-being. As a result, investments are a significant and crucial aspect of your contemporary life.
Nowadays, it’s not enough to save your money and store it somewhere secure. You must secure the growth of your funds, which only solid investments can provide. Other life insurance products have long been popular long-term investments in India.
However, with the advent of ULIPs, other types of insurance have fallen out of favour. Should it, however? What is the difference between ULIPs and other types of insurance? What makes you prefer one over the other?
1. Power of Compounding
The longer you keep your ULIP, the longer your corpus has to grow. ULIPs have a 5-year lock-in period during which your money remains undisturbed. This time also assists you in developing a disciplined savings habit.
A compound interest calculator may assist you in calculating how much wealth you can develop if you invest a given amount of money for a specific length of time using compound interest.
Compounding interest may be readily calculated online using a publicly accessible compound interest calculator. A compound interest calculator is simple to use since it simply requires a few basic inputs and returns a result in a fraction of a second.
2. Market-Linked Growth
A market-linked product is a ULIP. Thus, your money is invested in marketable assets such as stocks, bonds, and so on under ULIP plans. The returns on your ULIPs are determined by the performance of the fund in the market.
As a result, ULIPs have the potential to produce much higher returns than other investments. When prior performance is taken into account, ULIPs may also provide a double-digit return.
3. Beat Inflation in Long-Term
Inflation is defined as an increase in the overall price level of products. Inflation in the nation is continually rising, and there is a good possibility that it will continue to rise. As a result, your corpus may be inadequate.
ULIPs often yield returns that outperform inflation. Equities may help you achieve above-inflation returns.
4. Get Auto Fund Balancing Feature
In ULIPs, auto fund balancing works as a mix of equity and loan funds. The money is shared in a predetermined proportion between these two funds. The fundamental goal of automatic fund balancing is to diversify your assets across equities and fixed-income instruments.
To put it simply, your money will be placed in several financial products to reduce risk. So, if you believe your investments are not producing the necessary returns, you might shift your money to fixed-income securities. The aim is to have a backup investment in case equity-oriented funds underperform in the market.
5. Offers Fund Switching Options
Fund switches are a service provided by the insurance provider that allows you to transfer your ULIP investment from one fund to another within the same plan. You may transfer your units partly or completely between equity, debt, and equity to debt funds.
This allows you to exit losing funds and concentrate on profitable ones. Many firms restrict fund changes under ULIP policies. However, the top ULIP plans provide an infinite number of free changes.
How does a ULIP get market-linked returns?
The top ULIP plans attempt to build wealth over time by maximising returns on investment. When you buy a ULIP plan, the insurance provider invests a portion of your money in stocks and bonds and uses the rest to offer insurance coverage.
The investor is not required to monitor the investments since fund managers at the insurance business use their market expertise to maximize returns on investment. In various proportions, such fund managers may invest in a range of market vehicles, including debt and equities.
Because insurance firms provide several kinds of insurance plans, selecting the right ULIP plan to fit your individual financial objectives and long-term goals may be difficult. You must consider things like your risk tolerance, long-term objectives, and market knowledge.
After determining your personal needs and financial objectives, you must analyse the many kinds of ULIP plans available in the market. It may be prudent at this point to study the type and performance of the funds in which a ULIP invests in order to assess the returns on investment.
The shifting dynamics of the capital market have an influence on the performance of ULIP plans. Because market dynamics may vary over time, so can the performance of investor funds.
As a result, since profits are not guaranteed, investing in a ULIP plan is not risk-free. The investment risk in the investment portfolio is handled by the policyholder.
Wrapping It Up
By now, you might have got a clear idea of the ULIP’s meaning. ULIP plans are excellent for long-term investing. Along with life insurance, these plans invest the policyholder’s money in various market-linked funds in order to maximize returns on investment.
As a result, the investor has a strong opportunity to profit from market moves and generate excellent returns in order to accomplish financial objectives. The ability to swap between debt and equity funds has made ULIP plans popular among investors who can use their market knowledge to change their investment portfolios.
Don’t forget to use the compound interest calculator to calculate the compound interest accurately!