Things to Do Before Investing in Your Selected ULIP Policy
Purchasing the right insurance policy is of utmost importance as it provides financial stability to your family in your absence. Instead of opting for a plan that offers benefits like affordable premiums, you need to check for specific factors before settling for a plan. Unit-Linked Insurance Plans consists of numerous components that have to be suitable for you. So, let’s understand what you should do before investing in a ULIP plan.
6 Things to Take Care of Before Opting for a ULIP Policy
Understand Your Objective of Buying ULIP Policy
You need to have a long term financial goal in mind before purchasing a ULIP policy. Accumulating a certain amount during the 5-year lock-in period can help you plan the required corpus for the next 10-15 years. Also, the purpose of saving up money can aid in fulfilling those goals with the right planning. Objectives like retirement corpus, higher education of children or their marriage, etc. can be part of your goals.
Know the ULIP Funds and Risks Related to it
ULIP policies have an investment component where your contribution gets invested in certain funds to gain returns. There are three asset classes that you can choose from with varying returns and risk factors. Thus, you have to be aware of where you are investing your money and the risks related to it. The three asset classes are equity, hybrid and debt funds. Equity funds are highly risky as the ULIP returns are greatly affected by market volatility. Whereas debt funds are moderate to low risk class as the money is not invested in market-linked instruments. Hybrid funds are mixed funds where the corpus is invested in equity and debt funds in a specific proportion.
Consider Various Charges Involved
While securing a life cover along with an investment component in ULIP, there are several charges that come with it. Some of them are premium allocation charges, partial withdrawal fee, policy administration charges, premium redirection charges, fund management fees, mortality charges, etc. Being aware of such charges and fees enables you to choose the right ULIP policy that will benefit you in the future.
Be Aware of Premium Payment Period & Lock-in
Premium payment period is the number of years you pay the premium for your insurance plan. This can vary depending on the insurance provider and the type of ULIP policy you chose. Another crucial component is the lock-in period for your ULIP investment which is the term after which your policy matures. Most ULIP policies have a minimum lock-in of 5-years.
Learn Different Terms of ULIP
There are multiple terms involved in Unit-Linked Insurance Plan that you should be aware of while buying a plan. Some of these terms are:
- Fund switch – In ULIP investment, there are a number of free fund switches available depending on your insurer
- Life cover – Life cover is a sum assured amount given to your beneficiary in the event of death
- Maturity benefit – The amount you receive after the policy term expires is the maturity benefit
- Policy cancellation terms – The terms and conditions under which your ULIP policy can get cancelled is called as policy cancellation terms
Read the Terms & Conditions
It is always advised to go through the policy papers and read the terms and conditions. The section of exclusions is also a crucial part of the information as it mentions the things not included in the plan. You may have connected with an insurance agent for the plan or found information online. But it can only be official if it is also mentioned on your policy papers. Even after you purchase a ULIP policy, you have a free look period during which you can decide if you want to keep the plan or not.
You can now purchase the most suitable ULIP policy for yourself while knowing every aspect of the plan. Your financial goals and purpose of buying an insurance plan help decide the best plan for you.