Just bought a ULIP? Learn how to manage it

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If you have just bought a ULIP Plan or are planning to invest in one, you must be looking for an insurance cover along with an opportunity to create wealth to fulfil your long-term goals. A portion of the premium paid by you towards this plan will be used for investment in a portfolio of instruments selected by you, with the remaining kept aside for your insurance cover. These plans aim to generate market-linked returns over the longterm to help you build a corpus that can be used for funding retirement expenses or any other goal that you have set.

Here are some tips to manage your investment in ULIP and achieve your long-term goals while getting the benefit of taxsavings and financial stability in case of a mishap.

Plan Your Fund Allocations In-line With Your Goals– The main consideration for managing ULIPs and reaping their benefits is to decide the fund allocation. The decision should be based on the goals that you wish to achieve and your capacity to take risks. You have the option to choose an investment plan in which you wish to invest. Insurance companies offer a choice of equity, debt, balanced, or growth funds.
Review the Investment Option and Switch Funds with Changing Goals-Among the various benefits offered by ULIP plans is the option for policyholders to switch their money from one instrument or plan to another. You can make use of this feature to switch from one fund to another to boost your returns. The decision to switch should be based on a change in your goals or risk appetite or the performance of the funds managed by the insurance company. At a time when you can afford to take more risks, investment in equity funds is attractive, but as you age, the risk appetite goes down and so, the switch to balanced funds or debt funds should be considered. Do check how many free switches does your insurance provider allow and take advantage of this feature to maximise your returns.
Take Additional Coversby Paying a Little Extra– Several insurance companies offer additional protection with their ULIP plans. These include disability cover, cover foraccident protection, and critical illness cover, which are in addition to the life insurance cover included in your policy.
Waiver of Premium Rider-This feature of a ULIP policy calls for waiver of premium payments if the policyholder becomes critically ill or is seriously injured or disabled, subject to certain other stipulations. This means that all future premiums towards your ULIP policy get waived, but your investment and life cover continue.
Family Income Benefit Rider– Check for this rider which provides financial support to the family of the policyholder on the early occurrence of either the passing away of the person whose life is assured or a total disability due to accident or on the first diagnosis of any specified critical illness. Under this rider, around 1% of the sum assured is paid monthly for a specific period, thereby ensuring that the policyholder’s family can continue to achieve their life goals without any worries.
Stay Invested for Loyalty Additions – The loyalty addition refers to the extra amount paid by your insurance company once you complete a specific period with the policy. Also called the additional allocation or extra allocation and premium booster, the loyalty addition aims to encourage you to pay your premiums on time and stay invested for a longer tenure. Insurance companies offer loyalty additions at the end of the lock-in period or after the maturity of the policy. Take advantage of this feature to enhance your investment corpus. The value of the loyalty addition will depend on the premium amount, the term of your policy, and the frequency of premium payment.
Fund Booster– You can avail of the fund booster advantage by again staying regular with your premium payments and continuing with the policy. The insurance company will add a percentage of your annual premium to the fund value at the maturity of the plan if no death benefit has been paid under the policy.
Choose a Portfolio Management Strategy-Check whether your insurance company offers a choice of portfolio management strategies. As an investor, you have the option to not only decide the asset allocation of your funds, but also choose an appropriate portfolio management strategy. Choose a strategy that matches your risk profile and investment horizon and goals.
Use the Return Enhancer Feature– Some insurance companies offer policyholders an option to take the death or the maturity amount in instalments and continue to stay invested to earn more returns.