Choosing Between The Different Types Of ULIP Plans
ULIPs are the most popular form of investments that allows the idle savings to grow and simultaneously get a life cover. One can choose between the different Unit linked Insurance Plan designed to fulfil the goals of an individual.
ULIPs are categorised based on the risk appetite and the investment objective of an individual. Here is the classification of the ULIP plans, that one can choose basis the financial needs.
Different ULIP investments to choose from are-
Equity Funds– These funds are apt for those who have the ability to take high risk and has a risk appetite from medium to high. If the fortune favours, this kind of plan can give big returns. Equity-based ULIP investments are the riskiest investment but can give you the highest returns if stayed invested for a long term.
Bond Funds– These kinds of funds offer medium risk and medium rewards. Those whose capability of taking risks are low to medium can opt for this type of ULIP funds. Under these funds, your money would be invested in government bonds, fixed- income securities and corporate bonds.
Cash funds– This category of funds have negligible risks or can say, no risks at all. The corpus invested in ULIP will be directed towards cash and bank deposits, money market instruments or money market funds. As the risks are very low, the gains or rewards from these funds are also very low.
What Type Of ULIP Plans To Choose Based On Your Objective?
Your choice for a ULIP plan can vary depending upon your investment objective. So, your motives may vary like – funding your child’s education or building a corpus.
Funding Your Child’s Education– ULIPs are mostly taken for meeting this objective as it serves as a support for the child’s education even after the death of the policyholder. The payout for this ULIP plan is designed in such a way so that it meets the requirement in a seamless manner. The benefits of these ULIPs are paid once in a year and is only taken when needed for that specific purpose.
Building A Corpus Fund- ULIP Plans are the best investment cum insurance plans which help in building a significant corpus and also gives a life coverage. Building a corpus through different investment avenues to gain the maximum return becomes quite a tedious work. Investing in ULIP plans eases the work of the policyholders as the fund manager manages the fund in order to maximise the potential returns.
ULIPs For Creating Wealth
You can choose the ULIPs to create wealth depending upon your risk appetite over a time period-
Risk As Per Your Life Stage- Your risk-taking abilities change depending upon which life stage you are. Like if you are in your youth stage then your risk-taking capability would be high and so will be your corpus requirement. During this stage, the investment would be directed mostly to the equity funds. Similarly, as you grow old, your risk-taking appetite would decrease. The funds are thereby distributed within the debt funds or equity funds depending on your life stage.
Guarantee or Non-Guarantee returns- Guaranteedreturns come with very low rewards while non-guaranteed returns have a very high reward.The sum is directed to different funds depending upon which kind of return you choose. In the case of non-guaranteed returns, one can also choose the type of fund to stay invested so as to minimise the risks and maximise the returns.
Other than the above objectives, one can also choose ULIPs for building a retirement corpus or meeting any medical emergencies. Deciding the financial goals would further help in choosing the type of ULIP that would suit your needs.