In the investment world, it’s a standard rule that long-term investors reap more benefits than those who invest for a shorter duration. The same principle applies to Unit Linked Insurance Plans or ULIPs. ULIPs offer several unique features that reward investors who stay invested for longer.
ULIPs are investment-cum-insurance plans that allow investors to invest in various funds such as equity, debt, and balanced funds. However, these plans usually come with a five-year lock-in period, meaning that investors must stay invested for at least five years.
This article will explore five ways ULIP policy can reward long-term investors. Also, you can estimate the premium and potential returns on their investment in your Unit Linked policy with the help of the ULIP calculator available online.
Ways A ULIP Plan Can Reward Long-Term Investors
Maintaining the lock-in period
ULIP insurance requires you to maintain your investment for at least five years before any partial withdrawal can be made, which can be utilised to achieve important life goals.
By keeping your investment for a longer time, your wealth can increase significantly, creating a substantial corpus that can be used for various life milestones such as buying a new home, financing your children’s education, or wedding expenses.
Commitment & discipline toward premiums payments
By demonstrating consistency in paying your premiums on time and holding your unit-linked plan for a minimum of five years and beyond, you can qualify for loyalty additions to your account from your insurer. These benefits are a reward for your commitment and self-discipline as an investor.
Stay invested for an extended or significant period.
If you remain invested for a significant amount of time, you benefit from the compounding effect and earn higher rewards. Also, ULIPs offer market-linked returns. Long-term investments in such avenues help neutralise the volatility of the market and ensure significant earnings.
Similarly, wealth boosters offered by insurers could help you accumulate a more substantial corpus if you remain invested for an extended period.
Regardless of the current state of the capital market or the value of your portfolio, ULIP can ensure that your family’s financial goals are protected. If you hold your investment for an extended period, the premiums paid will eventually exceed the sum assured.
If any unfortunate event occurs, the insurer will provide either the fund value or 105% of the total premium paid to date, whichever is higher. This guarantees that your family’s financial needs are taken care of.
Diverse ULIP portfolio
Based on your risk appetite, ULIPs provide a range of portfolio management plans to safeguard your capital and returns. The high-performing Tata AIA ULIP plans offer diverse portfolio management options such as systematic transfer, return protection, auto-fund rebalancing, and flexible switching.
The first three portfolio management strategies aim to maximise investment returns, whereas the fourth strategy protects the accumulated earnings from investments in equity or debt funds.
ULIPs are designed to incentivise long-term investments, which can help your money grow while providing efficient investment protection with flexible switching. For example, when nearing a desired financial goal or policy maturity, you can transfer your earnings from the equity market to a debt fund.
ULIPs are an excellent investment option as they offer the dual benefits of investment and insurance under a single policy. Additionally, they provide tax benefits, making them a lucrative investment option. Therefore, it is recommended to begin investing in a long-term ULIP at an early age to grow your wealth and earn a high corpus in the long run.
Long-term investors can enjoy several benefits with ULIPs. With extended investments, abiding by the lock-in period and ensuring consistent premium payments, investors can avail of wealth boosters, loyalty additions and overall, attractive returns on investment.
Additionally, investors can put money in a diverse portfolio of avenues which are customised to every individual investor’s risk profile and investment objectives. Thus, with high return potential and excellent protection of investment, ULIPs are ideal investment options for wealth creation.