A unit linked insurance plan (ULIP) is widely popular as a long-term investment avenue. Now, the fact that it has both insurance and investment components is widely known, but do you know how it can help you with your future goals? Well, ULIPs can make it easier financially to reach those long-term and big plans you have in life – from buying a house to funding your kid’s higher education. Here’s showing what makes ULIPs ideal for this purpose.
The investment and insurance combination
The most important feature of a ULIP is that it ticks both the boxes of insurance and investment. So, you can secure the financial future of your family through the insurance component. They can use that money to live comfortably or to pay off your debts in your absence. The investment component can help you save up regularly to meet your long-term goals like buying your first house, higher education for kids, kids’ wedding, or even retirement.
Creating a sense of financial discipline
ULIPs have a lock-in period of five years, and you cannot withdraw money from that account before that. It makes sense because a ULIP is a market-linked investment. As such, the funds can be considerably volatile on a short-term basis but show good returns in the long term.
Besides, the lock-in period means that you will not reach out for this store of money anytime you need. Thus, your goal of long-term wealth accumulation remains safe. However, you can make partial withdrawals after five years, though it is better if you don’t because that will reduce the amount you receive at maturity.
Switch funds to maximize your returns
When you are saving for a long-term goal, you need to try and gain as much returns as possible. The fund switching option in ULIPs makes it possible for you. You can choose from a wider range of funds that include both debt and equity. You can stay safe throughout by going more towards debt funds, or you can take risks with equity funds.
Also, you can start with higher equity investments and increase debt investments towards the end of the term. Or, you can keep a balance of both types of funds throughout the term. If you switch your funds at the right time, then you will keep generating good returns on your investment. Thus, it will be easier for you to attain those long-term goals.
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Choosing the policy term as per your goals
Long-term goals are not the same for everyone. For someone, an important long-term goal can be buying an apartment of their own. For someone who already has an apartment of their own, a long-term goal can be sending children abroad for higher education. You can choose the policy term that best meets your goals.
For instance, you might start paying EMIs for that home loan in ten years, and you get a ULIP that matures in ten years. Someone else with a kid’s education as the goal can set the term at fifteen or twenty years. This flexibility makes ULIPs a great choice for your future goals.
You get multiple benefits from ULIPs. You get investment, insurance, and a way to reach your long-term goals. So, now is a good time to start considering a ULIP scheme.
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