How To Get Better Returns on ULIP Investments 1

How To Get Better Returns on ULIP Investments

Any individual who makes an investment does so with the intention of earning a good amount of returns. The first step in the process is to select the right kind of investment scheme. One option that is popular amongst people is a ULIP investment plan. Unlike other investment options, a ULIP is not just for market-linked returns but also offers the advantage of life insurance. This is a great way to check off the two most important elements of any financial portfolio. Not only do you get to benefit from market gains, but your loved ones also have financial security if anything were to happen to you.

There are many ways you can receive better returns on your ULIP investments. In this article, we take a look at some of them.

ULIP Investment

How does a ULIP policy work? 

Let’s first understand how a ULIP policy works so that you can implement better investment strategies. The premium of a ULIP policy is used by the insurer for two reasons – to build the life insurance corpus and to invest in the instruments of your choice. Insurers invest your money either in equity funds, debt funds, or a mix of both. Your ULIP returns in 10 years or 15 years depend on the market performance of the funds you have chosen and the number of units you own. Do note that the life cover is not affected, regardless of how your investment performs.

Ways to increase your ULIP returns 

  • Invest for the long-term 

Ask any expert as to which is a more beneficial option- short-term or long-term investment, and they will point to the latter. Any investment that is kept for a longer period of time enjoys the benefit of compounding. For the unaware, the concept of compounding refers to the process of earning interest on not just your principal amount but also on the interest that has already been gained on the principal amount previously.

So, the longer you hold the investment, the more will be the effect of compounding, as it keeps getting calculated on a bigger amount every year.

  • Make use of the ULIP return calculator 

These days, there are several tools, such as the ULIP return calculator, that help the investor make a more informed decision. You have to enter the required details into the calculator, such as the principal amount, tenure duration, and the kinds of instruments you are opting for (whether market-linked or risk-free). Based on the information you provide, the calculator will come with an estimated amount. If you are not satisfied with the results provided by the calculator, then you can modify the variables to suit your needs.

You should curate an investment plan such that you receive good ULIP returns in around 10 years without overshooting on your budget for premium.

  • Take advantage of the fund switching option

ULIPs offer an amazing feature called the fund switching option, which allows you to transfer your funds from one asset class to the other. So, let’s assume that you have invested your funds mainly into equity funds. However, you have a bad feeling about the markets in the coming weeks. In such a situation, rather than allowing your money to bear the brunt of bad market performance, you can instead shift it to debt funds. You can also shift the money in your ULIP investment plan from debt funds to equity funds as per your needs.

  • Analyse the ULIP benefit illustration

Before you sign the ULIP proposal form, remember to ask the insurer for a comprehensive ULIP benefit illustration. This document provides a 360-degree overview of the different aspects of your ULIP. With the help of this document, you will get to understand where your money will be invested, the charges you will be paying, and the returns you can expect at different stages of the tenure.

As with the ULIP return calculator, if the figures are not good enough, you should make modifications to your plan. You can avail of a top-up facility, opt for more market-linked options, and similar strategies.

Another important tip is to opt for a reliable insurer only. You are more likely to receive better returns if the past performance of the insurer regarding ULIPs has been good. Remember to read the terms and conditions of the policy before going ahead.

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Student. Award-winning communicator. Subtly charming coffeeaholic. Organizer. Gamer. A real dynamo when it comes to managing jack-in-the-boxes for fun and profit. Spent the 80's donating shaving cream in Libya. Spent 2001-2004 lecturing about Roombas in Jacksonville, FL. Garnered an industry award while getting my feet wet with sheep in the government sector. My current pet project is working on Slinkies in Orlando, FL. Spent 2002-2009 developing strategies for crayon art for the underprivileged.