The unique selling proposition of Unit Linked Insurance Plans (ULIP) is that it combines investment and insurance in one product. Until recession struck and the stock markets saw a steep fall, these used to be one of the widely sold products by insurance companies in India. However, a crashing stock market shattered the hopes of investors who were pained to see the NAV of their policies plunging down and putting them into losses.
Fundamentally, these plans remain a good investment vehicle but the extraordinary returns that the stock market offered in the bull time had raised expectations of the investors to wildest levels. These investment plans are actually intended to be an investment for the long term; hence buyers should avoid making Judgment by observing its performance over a short term.
ULIPs in India are now more attractive and safe
In the year 2010, with a view to protecting the interest of the consumers, IRDA had introduced a few changes in the ULIPs. IRDA made it mandatory for such plans to have a 5-year lock-in period. It also revised the structure of charges.
The way to go about investing your hard earned money
If your past experience with ULIPs has not been pleasant, it is wise that you rather not be biased. You can hope for good investment returns from your unit-linked investment plans by being disciplined and prudent.
- Allow your money to remain invested for a longer Term – In case, the markets fall, do not panic to liquidate. Rather continue with your Premium payment and be Assured of decent return rates.
- Plan your premium payment as a systematic investment plan Rather than paying your premium in one shot, opt for the systematic investment option under which you can stagger the payment of the premium over a 12 month period.
A few ULIPs also offer the investor an option of switching between investment plans. Currently, if you have invested in a 100 percent equity investment plan and you have a sense that the equity market will be underperforming during the year, you can switch your investment into an investment plan that primarily comprises debt. A unit linked investment plan will allow you a free number of switches every year.
These days, some insurance companies are offering new versions of these investment options for Money Back Policy in order to get back customers.
Buy ULIP online
It is preferred that you buy ULIP online as it can save you the cost of agent commissions. In fact, some insurance companies in India are offering these investment plans only as an online offering in an attempt to save on the distribution cost and pass on the benefit to the Policyholder in terms of lower Policy charges.
Moreover, when you buy a policy online, you also get the facility to compare various plans whilst sitting in the comfort of your home, so that you may buy a policy that fits your needs as well as your pocket.