ULIPs are one of the most sought-after life insurance plans as they provide dual benefits under a single plan. You get insurance coverage and market-linked returns in a single life insurance policy. Thus, it is one of the essential instruments in your financial portfolio.
While choosing the right unit-linked insurance plan for yourself, there are a few things that you must keep in mind. If you are looking for the best ULIP policy, it is important to take all considerations into account before you choose the right ULIP policy for yourself.
If you are looking for a guide to selecting the best ULIP policy in 2022, we have the right guide for you.
Guide to Selecting the Best ULIP Plan in 2022
Here are some of the things to consider before you buy ULIP insurance this year:
- How much coverage do I need?
Life insurance coverage is one of the most important aspects of any ULIP plan. Before buying a ULIP plan, you must understand the sum assured that you need. The sum assured is the payout that your loved ones will receive in case of your unfortunate demise during the tenure of the ULIP policy. As a rule of thumb, you must aim to get a sum assured that is at least 10 times the premium that you pay annually.
- What is my risk appetite?
Another essential question that you must ask yourself before you buy a unit-linked insurance plan. Your risk appetite will decide the type of funds in which you will invest your premium in. You have a choice of debt funds, equity funds, and a mix of both. You must understand your risk tolerance by considering your income, dependents, etc.
If you have a low-risk appetite, investing in debt funds would be the right option. And if you have high-risk tolerance, you can choose equity funds. If you are moderately open to taking risks, a mix of both would be a good option for you. For example, the ULIP from Tata AIA has the option of 11 varied funds that the buyer can choose from.
- How can I pay my premiums?
Premiums are the way to keep your policy active. Before you buy the best ULIP policy, you must know the premium and whether you will be able to afford the premium payment. If you do not pay your premiums, the policy will lapse. Thus, it is essential that you know whether the premiums are affordable for you.
Also, the premium payment option might differ from insurer to insurer. For example, you can pay premiums annually, semi-annually, quarterly, monthly, etc. So, check the amount and the premium payment frequency before buying a ULIP plan.
- What charges will I have to incur?
ULIPs come with various charges, and these charges affect your fund value. However, ULIP charges are subtracted from the fund that you have invested. Thus, you must understand the charges before buying a ULIP plan. In addition, you must buy from an insurer that offers ULIP plans at competitive charges so that they have little effect on the returns.
Some of the ULIP charges include premium allocation charges, fund management charges, mortality charges, policy administration charges, etc. Understand the charges and then get a suitable plan for yourself.
- Is fund switching allowed?
When you choose the right ULIP policy, you allocate funds based on the market conditions prevalent at that time. As time goes by, the market conditions might change, and you might wish to switch funds from debt to equity and vice versa. Thus, it is essential to check with your insurer about the option of fund switching. In addition, you must know the maximum number of times you can switch funds and the cost that you will have to bear for every switch.
Buying the best ULIP plan requires patience, research, and knowledge. You must understand all about ULIPs before you decide to invest. It is essential that you take all the major considerations in mind so that you can get the best out of your ULIP plan. Also, if you have doubts, clarify the same with your insurer before purchasing the ULIP plan.