Learn how to Maximise your Gains from ULIPs

United-linked insurance plan or ULIP is a time tested and popular investment cum insurance policy. It is a life insurance policy in which the insured gets to protect their family with a life cover, and it has an added investment component as well. A part of the premiums you pay go for your life insurance cover and the other part is invested like in a mutual fund.

Since ULIP is market linked, your returns are based on the performance of the fund you have chosen. That means, there are always ways to further utilise the market growth and earn more. Let’s go through some pointers that will help you earn maximum gains from an ULIP policy.

  • Select the right fund – ULIP offers a vast variety of funds from which you can choose from. The funds are categorised on basis of themes, sectors on which the fund focuses on, and index the fund tracks. The most basic categorisation divides the funds into three
  • Equity funds – These funds invest your money in shares of companies mostly. Shares are known to be the most volatile and they have a chance of giving you higher returns. But at the same time, there is more risk involved as well. By mostly investing in shares, equity funds share the same characteristics.
  • Debt funds – These funds have fixed interest generating securities like government and corporate bonds mostly in their portfolio. They generate a comparatively lower but steady return, and they are less risky than equity funds.
  • Balanced funds – If you want a mix of both equity funds and debt funds, then a balanced fund is something you can choose. They invest in equities and debts to balance the market movements and give you the most out of the market growth.

Here, choosing what works for you is the most important. Equity fund here might not be the default choice as there is more risk involved and it could hamper your money’s growth at times. The wiser option is to do your research and choose a fund that matches your investment goals.

  • Switch funds when needed – ULIPs give you the ability to switch funds for free a limited number of times and after that, for a small fee. It is advisable to use this option to the fullest to earn the maximum out of your investment.

For instance, while the market is bullish, you could keep your money on an equity-based fund. But when you see the market falling, you could switch to a balanced or a debt-based fund to make sure you don’t lose money.

You could also switch to a fund that focuses on a different sector or index.

For example, if your money is invested in an IT themed fund and you see IT sector falling and another sector, for example FMCG, rising, you could switch from the IT themed fund to FMCG themed fund to maximise your growth.

  • Choose a longer investment tenure – Just like mutual funds, ULIPs also give you the best benefits when invested for a longer time. By default, the ULIP lock-in period is set to 5 years to encourage investors to stay invested for a longer period of time. This by itself is an indicator that ULIP works better when invested for a longer time.

It is mainly because your investment gets compounded over time and it will give you much higher returns.

  • Buy from a trusted insurer – This step is of utmost importance. You should buy your ULIP policy from an investor that is trusted and have a proven track record. A reputed insurance provider will make sure your money is properly managed and you have surety that your investment is in safe hands. From a life insurance point of view as well, buying ULIP from a trusted insurance provider is considered more trustworthy.

How to buy an ULIP policy?

If you are interested to buy an ULIP plan and maximising your investment, the process is simple and hassle-free.

Go to your insurance provider website and choose a plan. You might need to do a basic registration, do a KYC, and provide your insurer with some medical details for life insurance purposes.

Once that is done, you will be prompted to choose a fund to invest your money in. Proper research is your best friend here. You could also go for advisory and use tools like ULIP plan calculator to help you choose the right fund.