How to Choose the Best ULIP Plans to Invest in 2022?
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How to Choose the Best ULIP Plans to Invest in 2022?

How to Choose the Best ULIP Plans to Invest in 2022?
  • 15th Jul 2022 |
  • 2,505

A Unit-Linked Life Insurance (ULIP) plan is a life insurance plan that helps policyholder to create wealth by investing their money in the financial market along with offering the security blanket against various uncertain life incidences. It is a combination of investment and life insurance to help you achieve long-term financial goals and provide your family security in case of your untimely demise. Under Section 80C of the Income Tax Act 1961, the ULIP premiums can also help you claim the deductions and offer you the benefits of being tax-free.

Understanding the plan better before making any decision will help you to make an informed decision for the future. Below mentioned ways will explain how to choose the best ULIP plan to invest in 2022

How to Choose the Best ULIP Plans?

1.Understand the Key Features of your ULIPs

ULIP offers policyholder the advantage of life insurance cover along with wealth creation. However, to get the best out of it, you need to understand the key features of ULIP:

  • Fund Switch
  • In case the policyholder is unsatisfied with their funds or in case of losses, they have the option to switch their funds to the ones that match their needs or are profitable for them.

  • Premium Redirection
  • The policyholder has the option to invest their future premiums in different funds of their choice other than their base fund.

  • Partial Withdrawal
  • The policyholder gets the option to withdraw a part of their money.

  • Top-Ups
  • This option allows the policyholder to invest the surplus money either in one go or multiple times in their existing policy.

2.Choose a ULIP Plan Depending On your Needs

A ULIP plan allows the policyholder to invest their money in equity, debt or both. Investing in equity helps to offer long-term high growth potential, whereas debt helps preserve wealth. Based on the risk appetite and needs, the policyholder can choose to invest in different types of ULIP.

3. Take the Right Amount of Life Cover

ULIPs offer policyholders to achieve their life goals and secure them and their families from any uncertain situations. They provide a lump sum amount called the Life Cover so that the policyholder’s loved ones can stay financially secure even after their demise. To increase your family security, you can increase the life cover amount.

4. Stay Invested with ULIPs for a Longer Time Frame

Apart from offering the life cover, ULIP also helps you in wealth creation. In case you stay invested in ULIPs for a more extended period, the company even provides you with specific bonuses in the form of loyalty additions and wealth boosters to further help you to grow your wealth.

5. Get Tax Benefits

Under the Income Tax Act, 1961, you can save your hard-earned money from taxes and avail various benefits at different stages of your life insurance policy.

Stage 1: Entry Advantage

Under the Income Tax Act 1961, you receive tax benefits on your premium payments.

Stage 2: Exclusive Switching Advantage

Under this stage, the debt-equity Switches are not liable to tax.

Stage 3: Exit Advantage

Under the third stage, you also receive tax-free maturity benefits that are subjected to conditions under Sec 10(10D)

Know your Charges in the ULIP

ULIPs help the policyholder to meet protection as well as the investment need. However, both of these investments have some associated charges; therefore, it is essential to know the details of the costs before even investing in one. Some of the charges include:

  • Premium allocation charge
  • Policy administration charge
  • Mortality charge
  • Fund management charge

In ULIPs, the charges are reduced in the long run, helping to increase wealth creation.

To choose the best ULIP, you should compare different plans and select the one that charges a minimal amount in the form of Premium Allocation, Policy Administration, Mortality, and Fund Management Charges.

Now that you have understood how to choose the best ulip plans, you can research and make an informed decision.

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Ref. No. KLI/22-23/E-BB/489

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