ULIP Plans: How to Choose the Best One?

ULIP is the abbreviation for Unit Linked Insurance Plan. A ULIP plan is a lucrative combination of wealth creation and insurance. Within this plan, a policyholder can make the premium payments . A certain portion of the premium amount is used to provide a life insurance cover and the remaining amount is put into wealth creation instruments.

In these plans, the funds are subjected to the risks involved with the capital market. The policyholder bears the risk on his/her fund portfolio. Thus, it is suggested to make a fund choice based on your needs and also your risk appetite.

There are some things that you should keep in mind while selecting the best ULIP plans in India. Following is a list of some factors to consider while buying a plan:

1. Analyse Your Goals

Before choosing a plan, it is a prerequisite for every individual to analyse their long-term financial goals. It is crucial that you opt for a plan that will help you in your long-term wealth creation goals.

2. Determine Financial Goals

Deciding on your financial goals is important. You should spend enough time and think about these goals before looking for plans. This will help make the process of selecting plans easy. These goals may range from having a corpus for your children’s higher education to having substantial funds for their marriage. You may also use the same amount of money for your post-retirement life. Once these goals have been determined, you can look for plans with their benefits that fulfil your goals effectively.

3. Compare plans

Every plan has its own set of benefits and features. A thorough comparison is a must if you want to choose a plan that best fits your requirements. Nowadays, you can even compare plan-information at your comfort since a lot of it is available online. There are websites that analyse and compare plans of different insurers on aspects such as sum assured value, different charges, policy term, and bring out the many differences in these plans.

4. Flexibility

One key factor to consider is the flexibility that the ULIP plans provide. Here are two things that you must know to compare the flexibility of the plans:

• Policy-Term Flexibility

Many plans are long-term; usually with a lock-in period of 3 to 5 years. Before buying a plan, you should analyse your long-term goals horizon.

• Flexibility

A ULIP plan allows the policyholders to choose the fund options even before buying the intended plans. Based on the risk appetite, the policyholder can opt for hybrid, equity, or debt plans.

5. Assess Risk Profile and Financial Stability

It is crucial to evaluate your risk profile and financial stability before opting for a plan. People in their 20s and 30s can go for high-risk plans which are more equity-focused to the extent of 100% equity allocation. For people who are looking for financial stability, you can go with a plan that primarily puts money in debt instruments that offer stability.

6. Understand the Features and Benefits

Every ULIP plan has distinct features and benefits. Having a thorough understanding of the advantages and disadvantages of each plan makes it easy to choose. You can find a better fit based on your requirements if the benefits and features are understood well.