The financial responsibilities of contemporary women have undergone a sea change compared to previous times. They are reaching new heights and creating new milestones with every passing day, setting new standards of excellence.
Therefore, it is expected that they will take enhanced responsibilities when it comes to financial decision-making and planning.
One of the most reliable investment options for every individual in the current age is ULIP. Before we delve deeper, we must understand the details of this plan.
What is ULIP?
A ULIP plan is an exclusive financial instrument that develops a connection between insurance and market-linked investment. The policyholders enjoy double benefits of insurance protection coverage and market-linked investments that ensure wealth creation through effective investment in several fund variants.
A part of the premium paid gets invested towards insurance protection, while the remaining towards various market-linked products like debt funds, equity funds, or balanced funds, based on your choice and requirements. It encourages investment vs. trading based on the market performance.
You can select your choice of debt and equity funds based on your financial targets and risk appetite. The double benefits of investment and insurance make ULIPs a flexible and unique financial tool.
Why should women seek ULIP investments?
As women are becoming financially more independent, they are expected to take enhanced charge of their lives and their family's finances and identify the right ways for wealth creation. Some of the most highlighted reasons for the ULIP plan investments include the following:
Financial security through insurance:
ULIPs ensure financial security through life insurance protection. In the case of any mishap, the designated nominee or the beneficiary receives the benefit. ULIPs act as a financial shield, especially during tough times.
Wealth creation:
ULIPs offer wealth growth and multiplying opportunities apart from life insurance protection. The investment component allows wealth creation over a considerable period. ULIPs offer corpus-building opportunities.
Control and flexibility:
ULIPs offer control and flexibility, unlike most other financial products. Considering your risk appetite and financial targets, you can make your fund choice. Moreover, you can exercise fund switching without any additional cost to maintain alignment with your objectives and investments.
Long-term growth:
ULIPs are perfect long-term wealth creation tools, suitable for achieving future goals. Women may need to face comparatively lower pay scales or career break phases. ULIP investments inculcate disciplined saving habits, encouraging long-term growth.
Tax benefits:
ULIPs even offer tax benefits u/s 80C and 10 (10D) of the IT Act of 1961. The premium payable amount, the maturity proceeds, as well as the sum assured all enjoy tax exemptions.
Factors to consider before ULIP investments
To enjoy optimum benefits from ULIP investments, you need to consider certain crucial factors before proceeding towards the investment:
Optimum payout:
The amount of sum assured is a lump sum payout offered to the designated beneficiary of the policyholder during any mishap while the plan is still active. The sum assured amount must be sufficient to handle the family finances well.
Additional charges:
Existing fund management costs, governance costs, mortality charges, and top-up expenses are some of the common costs associated with ULIPs. Not every company impose all these fees, and some companies even offer certain refunds. Clarify all sorts of charges associated with your preferred plan before finalising.
Authenticity:
Since ULIPs are long-term investment tools, you must investigate the authenticity of your chosen insurance company before buying. You must clarify all sorts of solvency standards and solvency ratios, as these are great evaluators to determine the market credibility of the insurance company.
Asset allocation:
The risk tolerance of the concerned policyholder must determine the asset determine the ULIP’s asset selection. Debt funds are ideal for safe policyholders, while risk players prefer equity funds. It is best to maintain a balanced approach, by cleverly combining risks and rewards.
What other Reads?
Comparison:
Before you finalise your purchase, ensure that you compare the ULIPs and their features while critically evaluating all the pros and cons. However, the previous success of any ULIP fund does not guarantee its future success. It is entirely dependent on market performance.
Lock-in period:
Most ULIPs come with a standard lock-in period of 5 years, during which your fund remains invested and you cannot withdraw. You have to continue your investment for at least 5 years to reap the full benefits.
Flexibility:
Considering your risk tolerance and objectives, you can choose your funds ranging from debt funds, equity funds, and hybrid funds. You can even ensure fund switching based on your requirements and fund performance.
Loyalty additions:
Several ULIPs offer loyalty additions as a bonus for continuing your investment. Such additions enhance the fund value and returns, especially in the long term.
Partial withdrawals:
ULIPs offer the facility of partial withdrawals post the lock-in period. This feature comes in handy during financial constraints.
Free look period:
ULIPs come with a free look period during which you can review the plan terms and conditions post purchase. If it does not suit you, you can even cancel the plan during this period without any cost.
Conclusion
Considering all these aspects, you must begin your ULIP investment early in life to reap optimum benefits. It acts as a financial empowerment tool for women through which they can control and secure their financial future.
