Do you know the benefits of ULIP Funds?
Disclaimer: In this policy, the investment risk in the portfolio is borne by the policy holder.
Unit linked insurance plans, or ULIPs as they are popularly called in short, help you get the benefit of investing in the capital markets while enjoying life insurance protection. ULIPs offer different types of market-linked funds for investment. You can choose one or more funds. The premium you pay is directed to the desired funds, invested in a diversified portfolio of stocks and securities. Moreover, every fund is professionally managed by experienced fund managers to get the best returns on your investments.
However, before choosing a ULIP fund, you need to ensure that the fund suits your investment preference, financial goals, and, most importantly, risk profile. So, here’s a look into the different types of ULIP funds that are usually available in the market.
Types of ULIP funds
Equity funds are those that invest a significant proportion of their portfolio in stocks and equity-oriented securities. Since equity has a high risk-return profile, equity funds have high volatility risks combined with the potential to generate high returns.
Some of the common types of equity funds that you might find include the following –
- Large Cap oriented funds that invest primarily in large-cap stock with marginal investment in high-quality Mid and Small Caps
- Sector-specific funds like PSU or infrastructure funds
Debt funds are those that invest a significant part of their portfolio into debt instruments, which carry a fixed rate of interest and have low to minimal risks. As a result, debt funds have a low risk-low return profile and are suitable if you are risk-averse with your investments.
Common types of debt funds include the following –
- Bond funds that invest in Government and Corporate bonds
- Gilt funds that invest in Government securities
Balanced funds combine the best of both equity and debt. A part of the fund is invested in equity for attractive returns. In contrast, the other part is invested in debt to stabilize the volatility risks. As a result, balanced funds have a moderate risk-moderate return profile and suit investors with a moderate risk appetite.
Benefits of ULIP funds
ULIP funds allow you complete flexibility. For example, you can switch between the available funds and opt for premium redirection to invest in another fund next year.
ULIP funds offer liquidity after the lock-in period is over. You can make partial withdrawals from the fund to meet your financial needs.
Being professionally managed, ULIP funds ensure that the best securities are held in the portfolio for maximizing returns and minimizing investment risks.
You can also pay top-up premiums to enhance the fund value if your investments give you good returns.
Unique Tax Advantages:
Annual premium payable on the policies up to INR 1.5 lac is available as deduction under section 80C.
*Tax benefits are as per current tax laws and are subject to change
Compounding the capital: A virtue of long term investment in ULIPs
When investing in ULIPs, you should remember that they are market-linked instruments. As such, they are exposed to market risks. The returns from ULIPs are not guaranteed. They depend on the fund portfolio’s performance, which, in turn, depends on the market performance.
Have a long-term investment horizon to iron out short-term volatile movements to allow the capital to compound.
Things to consider when choosing the best ULIP
Everyone wants to buy the best, don’t they?
So, when you are investing in a ULIP, you should choose the best plan. To do so, here are some things that you should consider –
- Opt for a plan that offers a range of funds to choose from
- Look for free switches so that you can change funds with the changing market dynamics
- The feature of top-up premiums can help you maximize your savings
- The charges should be low so that you can get the maximum out of your investments
Aviva Fortune Plus – a ULIP with good fund benefits
Aviva Fortune Plus is an advantageous ULIP plan that not only gives you a choice of 7 fund options but it also blends in all the benefits of ULIP funds. Moreover, with Aviva Fortune Plus, you can –
Get the charges* refunded on maturity
Switch free of cost
Top-up premium whenever you want
Withdraw or invest in the plan systematically
Enhance the coverage with Add-on Benefits
Invest in sector-specific funds for attractive returns
*Premium Allocation charge; Mortality & Policy Administration Charges, excluding any taxes
So, understand the available ULIP funds, their benefits, risks and return profile and then invest. Choose Aviva Fortune Plus for a diverse fund offering and maximize your returns.