How to choose?
Choosing a ULIP is a process of carefully analyzing the following and considering certain factors based on them:
- Risk appetite
The level of your risk appetite is really important to consider. You need to know what the level of risk that you can take and afford to take in case of situations like market crashes because the market place is an unstable place, much like our lives. You need to choose a unit linked insurance plan in accordance with your risk appetite. If you invest into a high risk ulip plan thinking that the market has been stable for the past few years and the market ends up crashing or your money gets depreciated, it would extremely difficult for you to handle the high losses.
- Market risks
You need to be aware of the risks that the fund markets and the money markets, where your investment might go into, carry. Having knowledge of the fund markets and the risks that they have will help you to choose the correct time to take up a ULIP plan and start with your insurance and investment plan.
- Your requirements or goals
Everyone has a particular purpose for which they take up insurance or investment plans. You should understand those goals or requirements and analyze how much money it would cost you to make those goals achievable. A ulip plan allows you to decide the amount of premiums you want to pay. The sum amount for the investments can be decided by the investor or the policy bearer itself. This amount is also allowed to be modified later in the term of the plan, so you can choose any comfortable amount and go up later. The goals you might want to achieve may be like the education of your child, your higher studies, any property you want to buy, a vehicle you want to get, or even investment for starting up a business. You have to find out how much money these things cost and maybe add up the inflation rate over the years and then decide on how much investments you want to make.
What to choose?
There 4 types of ulip plans that a policy holder can invest into. These are offered to the people to choose from in accordance with their risk appetite so that they know how much risk they can afford to take in case the market or the fund into which their money is invested crashes or collapses.
- Income, Fixed – Interest and Bond funds ULIP
The income, fixed – interest and bond funds are a type of ULIP fund to invest your money into. There is a medium risk that is attached with investing into this plan. So if you have a medium risk appetite, you can invest into this. The returns that you will get on your investments are on a low to medium range. The funds for the investments are invested into corporate bonds, government securities, fixed-income securities, etc.
- Balanced Funds ULIP
Another type of unit linked insurance plan is the balanced fund. The balanced funds are known as one of the most stable funds of the lot. Stability of the fund reflects in the name of the balanced fund itself. The investment money is put into different funds which make it the stable plan that it is. The investments are divided and invested into different fund markets and areas. The funds are invested into various equity instruments like equities and company stocks etc. The return with this fund is also high. The funds are also invested into fixed-interest instruments which involve a comparatively lower risk which is an added benefit. The balanced fund carries a risk which is of a medium range. So, if you have a risk appetite which allows you to invest into funds where you can afford to lose investments on a medium scale, then the balanced fund is the best type of ULIP you can invest into.
- Cash Funds ULIP
The cash funds are a kind of ulip plan the investor can choose to invest into. The investment in the cash ULIP funds will be invested into cash, bank deposits and money market instruments so that the capital appreciates over time. The risk involved in the cash funds is quite low. The low risks of the cash funds also give out a low reward which is expected when the risks are very low. So, if you are just starting out with investments plans or are a young adult, this could be the best plan for you to invest into to see how things go and work out for you.
- Equity Funds ULIP
Equity funds are a kind of unit linked insurance plan that investors can choose to invest into. The money or the investment amount is put into stocks of companies and equities. The equity funds are one of the riskiest ULIP plan funds to put your money into as the equities and the stocks have a really high risk. But, the fact with a high risk unit linked insurance plan is that the return on investments that you will get will also be very high. So, this is a good plan to take up if you want to get high returns on your money invested. So, the equity fund ULIP is a really good plan to invest your money into in case you have a high risk appetite and can afford to take a risk on the higher end of the spectrum.
So, these are the certain factors and types of the ulip plans that should be considered by the investor or the policy holder before they decide to invest into a ulip plan and get a good insurance cover claim and good return on investments which make you feel that the investments were worth outing into such ULIP funds. Choose well, get rewarded well!