6 Factors You Should Check Before Initiating a ULIP Investment

Due to the availability of innumerable investment options, the choice of investment ends up being a tedious task. In order to safeguard the needs of an investor, it is important to opt for the right investment policy. An investment in a Unit Linked Insurance Plan (ULIP) has become a leading choice of a majority of investors due to its low costs and high returns. However, before a ULIP investment, consider the following factors mentioned below in order to land up with the best ULIP Plan in India. Take a look:

List of factor to check before a ULIP Investment:

  1. Focus on the features and benefits

Since ULIPs aren’t particularly restricted to only insurance and wealth creation, it provides multiple ULIP benefits to the customers. Other benefits like flexibility and liquidity attract a vast number of investors. One of the major advantages of ULIP investment that has gained popularity is the tax saving benefit of the policy. When you invest in a ULIP Plan, this tax benefit is applicable to the maturity amount as well as the premiums which are paid towards the policy.

  1. Read the terms and conditions

When you purchase a ULIP Policy, it is advisable to go through the terms and the conditions of the policy carefully. See to it that you review all the pages with a keen eye in order to check the inclusions and exclusions. Failure to do so can lead to the rejection of claims. For instance, if the policy excludes the case of suicides and you make a claim for death due to suicide, the insurance company will reject the claim, immediately.

  1. Look out for the deductible charges

For the past few years, ULIPs were known for its high charges in the market. These high chargers repelled the investors from investing in a ULIP Policy. The new-age ULIPs provide the investors with low charges in different forms at the time of purchase of the policy. The following are the types of charges levied under a ULIP Plan:

  • Policy administration charges
  • Fund management charges
  • Mortality charges
  • Premium allocation charges
  1. Check the payment of premiums

In order to continue the investment in a ULP Policy until its lock-in period, the investor has to pay the premiums on a regular basis. Based on their convenience, the policyholders can make the payments annually, monthly and quarterly. Moreover, the premiums are deductible up to Rs. 1,50,000 according to Section 80C of the Income Tax Act, 1961. If the policyholder is unable to pay the premium, then he is allowed with a grace period of 60 days. Failure to do so will lead to the lapse of the policy.

  1. Understand the consequences of the lapse

When a policyholder misses the payment of premium even on the grace period, the ULIP Policy lapses. With the lapse of the policy, the insurance companies cease all the rights and benefits from the policyholder. In order to continue your ULIP Policy, renew your policy within the first 6 months from the time of lapse. Renewal after 6 months comes with payments of hefty penalties and higher premiums.

  1. Consider the lock-in period

Ideally, the ULIP Plans comes with a lock-in period of 5 years. Opt for a ULIP Plan with a longer policy term. The longer the lock-in period, the higher the creation of wealth. When you have a huge amount in your fund, you’ll be able to meet your financial goals to the soonest.

Now that you know the topmost 6 factors to check for before initiating a ULIP investment, what are you waiting for? Before making a ULIP Investment, compare multiple policies in order to understand the offerings of different policies. In order to make comparisons, utilize a ULIP calculator in order to find out the features, benefits, and premiums offered by numerous ULIP Plans. Taking all this into consideration, an investor will undoubtedly make his ULIP investment worth all his savings.

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