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Looking for a unit-linked insurance plan?
With time, the expense of living has risen. What your money bought you a decade ago is worth significantly less now. While earnings have grown, it is tempting to wonder where all of your money goes.
As a result, saving money is difficult. While it is necessary to conserve money, it is not always as simple as one may think. Furthermore, making investing selections so that the money you’ve set away will multiply and increase has always necessitated a certain level of understanding.
Having said that, unit-linked insurance plans are one of the most popular investment alternatives for consumers looking to make disciplined investments that will help them to accumulate wealth.
What is ULIP Investment?
Unit-linked insurance plans (or ULIPs) are one of the most ingenious kinds of insurance now accessible on the market, serving a dual purpose. They function as both an insurance policy and an investment instrument.
In addition to providing life insurance, unit-linked insurance plans allow policyholders to invest in funds of their choice. These alternatives include equity funds debt funds or a combination of the two. Unit-linked insurance plans provide the advantage of both investing and insurance in this way.
ULIP Investment Offer Flexibility
1. Flexibility to choose your fund option
Most ULIP investment plans provide a selection of equities, debt, and balanced fund alternatives. As a consequence, you may invest your money based on your risk tolerance and expected return. The unit-linked insurance plan also allows you to shift your money across multiple funds to maximise your profits.
2. Flexibility to change your Life Cover
With a unit-linked insurance plan, you have the option of selecting your Sum Assured at the start of your policy. Some ULIP investment plans additionally allow you to increase your Sum Assured throughout the plan to meet your protection needs as you progress through life (E.g. marriage, childbirth, etc.).
3. Flexibility to change your premium investment amount
The unit-linked insurance plan also lets you pay an additional premium on top of your existing premium. You may utilise this option to get the most out of your investment.
4. Flexibility to opt for a rider
Riders are optional elements that may be added to your ULIPs to provide further protection. The Unit Linked accident and disability benefit riders are some of the most prevalent riders.
It raises the amount of Life Coverage that the family receives in the case of accidental death. It also assures that your Life Coverage remains if you become disabled as a result of an accident.
How does the ULIP fund switching feature work?
Unit-linked insurance policies can move funds, giving the policyholder a great deal of freedom. As an investor, they have the option of investing in debt or equity funds or in a portfolio that includes both equity and debt funds.
Policyholders can transfer their investments from one ULIP fund to another under this policy. Furthermore, these transfers might be for partial or full units, making them even more acceptable.
When is the right time to switch?
Because policyholders have the option to convert from one unit-linked insurance plan fund to another at any time, they maybe wondering when they should take advantage of this opportunity. The following are ideal criteria for policyholders to consider while deciding on an acceptable time to switch.
Tough market conditions that are difficult to handle may stimulate a changeover in the ways to deal with the current volatility in the stock markets. Volatile market circumstances can stymie and expose your assets to hazards.
Switching funds is advised at this time since debt instruments may be safer at this time. When the market stabilises, policyholders can always return their money to equities.
Although it is not always feasible to precisely synchronise the switch with market movements, it is a useful technique for mitigating risk to some extent.
When a policyholder’s plan is about to mature, he or she can swap funds. Switching assets to safer alternatives, such as debt, maybe a prudent decision after investments have grown exceptionally abundant and are nearing maturity.
Policyholders should make these decisions with the unpredictable nature of the stock market in mind since this market has the potential to wipe out cash that may be difficult to recover.
How to make ULIP fund switches?
Those with Unit-linked life plans have the facility to switch funds in a ways listed below –
- Insurance companies provide switching facilities – Insurance companies offer a changeover form that may be completed and returned. The requested units will be moved to the fund of the requester’s choosing based on the information given.
- Self-service online transfers – Policyholders can complete the switching procedure completely on their own. Most firms offer online platforms that allow policyholders to do these operations.
- Enlist the aid of a fund manager –Policyholders can direct that automatic switching be performed on their behalf. In such cases, a fund manager is in charge of making switches based on predetermined criteria agreed to by the policyholder. while keeping market circumstances and the policyholder’s objectives in mind
Partial withdrawal feature of ULIP Investment
Policyholders of unit-linked insurance plans have the option to withdraw or a portion of their accrued fund values before the policy term expires. This facility has great importance since it can assist cover rainy day costs.
It should be noted that the whole sum is not accessible for withdrawal, and this service is only available once the stipulated lock-in time has expired. This service is available to policyholders for both the base policy and any top-ups.
Additional requirements may be stipulated in the policy terms and conditions, depending on which withdrawals may differ from one ULIP investment to the next. Having stated that they are typical as follows:
Withdrawals from investment-linked pension schemes are not permitted. Plans that provide insurance to minors only allow withdrawals after the minor reaches the age of 18.
Wrapping It Up
Unit-linked insurance plans are feasible insurance policies because they give policyholders both life insurance and an investment strategy, thereby killing two birds with one stone. They provide a lot of versatility, which adds to their popularity. It is critical to read the fine print before purchasing a plan so that you are not caught off guard in the future.
