Every individual has various life goals, such as purchasing a new house or a car, traveling, planning children’s wedding, and so on. While many of you might require financial backup to meet your goals, the rest of you might require adequate funds to fulfil it. For people who are striving every day to save extra, investing in a Unit Linked Insurance Plan (ULIP) can be the right choice. A ULIP policy can be a long-term financial solution for your insurance as well as investment needs. While ULIP insurance can cover for your life goals, ULIP investment can let you build an enormous corpus to fund your goals. Let’s understand how you can provide financial backup to realize your dreams with ULIP plans:
- Develop a financial discipline with a long lock-in period
The tenure of a ULIP policy during which it does not allow partial withdrawal can be termed as the lock-in period. Under a ULIP policy, the lock-in period can be for a period of five years. The duration of five years can allow you to inculcate financial discipline in you.
When you invest in a ULIP policy, you should pay the premiums on a regular basis to continue your investments. Ideally, you can make the payment of the premium amount annually, half-yearly, monthly, and quarterly. Therefore, select a premium payment mode that can allow you to pay the premium without financial constraints. With a disciplined financial habit, you can achieve your life goals with ease in the future.
- Accumulate wealth with compounding
A ULIP policy is a long-term investment, which can allow you to accumulate wealth throughout the on-going tenure. If you want to build a substantial ULIP corpus, you should invest at a young age. Investing in a ULIP policy when you are young can be beneficial for reaping the benefits of the power of compounding.
Compounding can let you earn interest on your returns at a young age since you have an amount of time in your hands. Due to the benefits of the power of compounding, you can start by investing Rs. 5,000 at the age of 30 and grow your corpus to Rs. 75 Lakhs by the time you grow old. Since compounding can let your ULIP funds grow due to a significant amount of time, you can meet your long-term goals.
- Receive better returns with multiple fund options
A ULIP investment can be flexible. It can allow you to choose between the available ULIP funds, such as equity funds and debt funds based on your risk appetite and investment goals. Therefore, you should analyse your risk tolerance before you decide to invest in either of the two funds to reap better returns. The choice of funds can determine the returns on your investment.
The equity funds under a ULIP policy can be risky since it is directly linked to the market. Although equity funds are the riskier investment option, you can receive relatively high returns. The debt funds can provide you with low returns since it involves minimal risk.
- Control market volatility with the switching feature
As an investor, your worst nightmare can be market volatility. The risk of the market can keep you away from investments. If you don’t invest, you might not be able to reap the benefits of investments, such as large corpus generation, better returns, and so on.
Although a ULIP policy is a market-linked product, you can control the impacts of market volatility with the switching feature. Under a ULIP policy, the switching feature can allow you to move from one fund to another as well as secure your invested capital from market fluctuations. However, you should consider the market scenario before making a switch between equity funds and debt funds. For instance, you should shift to debt funds when the market is low.
In a nutshell, a ULIP policy is a dual-benefit financial product, which can turn your investment and personal goals into reality along with providing you with a life cover. However, see to it that you choose a ULIP plan that can align with your goals. With ULIP benefits, such as long lock-in period, the power of compounding, fund options, and switching features can ensure your long-term goals are successful with the help of a ULIP policy.