Quick tips to pick the best ULIP plan

With various financial instruments making their way into the market today, you have more options to diversify your monetary portfolio. Also, the probability of gaining better returns has increased too.

One such financial instrument is a ULIP. It comes with a dual benefit of wealth creation and insurance, which has made it quite popular.

In this article, let us understand how this plan works. 

What is Unit Linked Insurance Policy?

It is a dual-faceted insurance product issued by many insurers. ULIP requires the policyholders i.e. you, to make regular premium payments. These payments are further divided into two parts. One part is utilized towards the insurance cover. The second part is pooled with assets of your choice and used for wealth creation.

How does this policy work?

As mentioned above, the insurance company divides the premium paid towards this plan into two parts. One part is allocated towards the funds chosen by you. The other part goes towards the insurance cover offered by this policy.

Once your money is allocated for the funds, the insurance company assigns ‘units’ to you. The value of these units is the same as the paid amount.

When you withdraw a partial amount from your corpus, some of the units are sold to provide you with the returns. Insurance companies also deduct some policy charges in the form of units.

How to choose the best ULIP plans?

1. Choose the plan as per your goals:

As a thumb rule, before you opt for any financial instrument, it is important that you set your goals. This will help you define what you need to look for when you select a financial plan. Furthermore, you can select a proper policy tenure and premium amount accordingly. 

2. Opt for sufficient life cover:

Given the dual benefit nature of plan, in the case of your untimely demise, the life cover from this plan will protect your loved ones financially during tough times. Thus, it is crucial that you opt for adequate insurance cover when you buy this plan.

3. Stay through the entire tenure:

Although this policy lets you withdraw your returns before maturity, to reap better benefits and higher returns try to stay till the policy matures.  Hope these tips will help clear your doubts so you can find the best ULIP insurance plan available in the market to achieve your financial goals.

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