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Here's Myths on Investments in ULIP Plans

Like any investment schemes, even ULIPs have myths associated with them. Here are 4 ULIP myths you should know for better investment opportunity.

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Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

One of the facts about investment is that it comes with risks involved because all of your focus is on saving money to secure your future at some point in life. Also, there are multiple investment options available for all investors today. These options are designed so that it caters to the investment and financial needs of all.

However, there is considerable misinformation related to these financial investment options. And ULIP, a popular investment option today, is also not spared of such misinformation. This non-factual misinformation that is not based on fact and reality about ULIP as a financial tool and its functionality are called ULIP Myth.

If you are willing to invest a huge sum at once, you can invest in Debt funds, while if you want to invest small amounts systematically over some time, you can opt for SIPs & ULIPs. But, as normal human behavior, once you have a good sum invested, you start worrying about it. This is where myths about investment tools come into play and haunt you.

This article will discuss some of the ULIP myths and bust them with the facts around them.

Top 4 ULIP Myths to be aware of

1. ULIPs are High-Risk Investment Plans.

This one is among the most common ULIP Myths. Many investors believe that investing in ULIP is a high-risk investment. Those who believe in this are less informed about ULIP’s policy guidelines and fund investment options.

ULIP is a highly diverse investment option that allows investors to invest according to their financial goals and risk-taking capabilities. ULIPs allow the investor to invest in various funds and at the same time also allow the ULIP policyholder to switch between the funds as per their requirement.

Top 4 Myths About ULIP Investments You Should Know

2. ULIPs are costly.

There is a ULIP myth that they are costly, and an investor or ULIP policyholder has to pay various charges while opting for ULIP.

This is the most inaccurate piece of information about ULIPs. ULIP policyholders are made well aware of the levied charges as per the policy guideline. Also, the charges levied on ULIPs are very transparent and upfront to the investors. Moreover, compared to other investment options, charges on ULIPs are comparably lesser.

3. ULIPs don’t allow liquidity

Contrary to what investors believe, ULIPs are one of the best investment options if you are looking for a modern investment option that is both long term, provides security, and allows you to stay in sync with the market growth by allowing you to invest in market funds.

In addition to this, ULIPs allow partial withdrawal. Meaning, a ULIP policyholder can withdraw a partial amount from their investment once the lock-in period of the ULIP policy is over. You must also read about ULIP policy surrender options, but it is highly advised to not opt for surrender before the lock-in period is over, as it can incur great losses.

4. ULIPs provide low returns.

The ULIP policies are one of the most modern investment options. If you check an average return on ULIPs every five years (lock-in period), you will note a satisfactory trend, and the trend gets better as you move towards long-term investment.

The more popular a plan becomes, the more are the chances of misinformation spreading. Thus it is highly advised that as an investor, you must always carefully read the policy documents and clarify even the smallest details and confusion with your insurance/investment agent. The right information is the key to the best investment.

In this policy, the investment risk in the investment portfolio is borne by the policyholder.

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