- Higher return with complete transparency
- Option to switch funds
- Appropriation of funds according to risk appetite
- Allows top-up premiums and riders
All our life we work to make the future better. As a student we study hard for a great career. And in our professional life, we push ourselves to secure a happy and care-free retired life. Now while hard work is essential to achieve your goals, it should also be backed by proper financial planning.
Post retirement your monthly cash flow will stop, but your bills will not. In fact, they could potentially increase over time because of the need for healthcare expenses.
To meet these expenses, you need to start saving to build a pension fund to meet your expenses. Unit Linked Insurance Plans (ULIPs) are an attractive option available for your retirement planning. ULIPs provide the benefits of both insurance as well as mutual funds. The inherent nature of the product helps you plan for a happy retired life.
Let’s look at the characteristics that make ULIP an essential investment tool.
When you invest your hard-earned money, you think of two basic things: security and returns. ULIPs provide both. The average returns in ULIPs are considerably higher than other alternatives like bonds, endowment plans, FDs, pension plans, etc. The reason behind such superior returns is that the funds are invested in the equity market. Here you are getting the benefits of equity market at a much lower risk compared to that of the actual equity market because of diversification and professional fund management by experts.
Wide range of Options
No two investors have the same risk appetite. ULIPs understand that and provide a myriad of investment options to the investor. There are three basic categories of funds available.
- Equity funds where major focus is given to investing in equity.
- Debt fund where focus is bonds, government securities, etc.
- Balance fund which is mixture of above two.
Under the three basic options, there are numerous funds with almost endless number of variations. Based on the company, sector, equity and debt proportion wise combinations, there is a special fund for everyone. You can choose the option best suited for you. Not only that, you can change the fund options later as well.
Flexibility to switch
Let’s consider the scenario. You started investing in ULIPs when the stock market was giving excellent returns. Being an informed investor, you chose an equity-based fund. Couple of years down the line, the market is not doing well and you prefer a more secure debt option for your money. What will you do? With ULIPs you can switch the funds as per the performance. Most financial houses offer four free switches per annum. It gives you the flexibility to move your money to get the best result.
Top Up and Riders
If you have surplus money to invest in a fund with superior return; ULIPs provide you the option by top up premiums. You can put the extra fund in your existing plan with relatively low cost. The charges for top up premiums are generally 1% - 3% which is considerably lower than obtaining any fresh policy.
The retired life is the one where you are ideally stress-free. Here you should not be worried about money for your daily activities. ULIPs take care of that and also provide enough to indulge in certain luxuries. You, as an investor, can track how your money is performing and where it is invested. All the information will be available to you online.