Though ULIPs have become quite a popular investment option for many, some investors aren’t yet sure about it. This could be due to some misconceptions they harbour, or a few myths related to the investment option under ULIP. But if you consider the insurance policy, it is surely a unique one as it provides you with a life cover along with the opportunity to earn returns. So, to avoid missing out on such a great financial instrument, let’s debunk some common myths related to ULIPs.
Myth 1: ULIP Policies are Risky
Due to Unit-Linked Insurance Plans being market-linked instruments, many individuals assume such an investment to be risky. Though you can invest in equity funds that are riskier as they are highly influenced by the market movements, you can opt for other fund options. There are debt and balanced fund options in case your risk appetite is low, and you want stable returns. Therefore, you can choose your investment type based on how much risk you can afford to take. If you were to invest in equity funds and later do not want such high-risk exposure, ULIPs also allow you to switch funds. Thus, such an insurance policy isn’t risky.
Myth 2: ULIPs Cannot Be Discontinued
Don’t we all prefer having the option of liquidating our investments in case of an emergency? Though no one plans for a short-term investment, policyholders like having the choice of exiting or surrendering their policies. And this is possible when it comes to ULIPs as well. You can easily discontinue your insurance plan before the lock-in period on paying the necessary surrender charges. After completing the five-year lock-in, no such additional charges are applicable, and the process is simple. Therefore, you can easily exit your ULIP plans to get returns without much trouble.
Myth 3: ULIPs Don’t Offer Sufficient Life Cover
ULIPs are popular amongst investors as it enables them to invest in the market and thus, you might hear people advising you to get a life cover separately. However, ULIPs are quite capable of fulfilling your insurance needs! You can get a sufficient amount of life cover if you aim for the right sum assured amount and pay the required premium. Check out the ULIP calculator to plan your insurance coverage better!
Myth 4: You Cannot Earn Good Returns with ULIPs
As it is a market-linked financial tool, your returns depend on the kind of fund you choose for investment. When it comes to equity, the market is volatile and thus, involves high risk. However, it also gives higher returns in comparison to other fund options. But as an investor, you might not prefer the increased risk. Hence, your ULIP returns are highly influenced by your choice of fund and the tenure for which you stay invested. In case you exit the policy right after the lock-in period gets over, your returns could be average. However, on opting for long-term investment, your ULIP plans returns can be lucrative.
Myth 5: You Aren’t Allowed to Invest Extra
Because ULIPs have an investment component, you might want to invest some surplus amount for better returns. So, is it possible with such an insurance plan? With the ULIP top-up facility, you can easily pay an additional sum over and above your premium. The insurer enables you to choose between increasing your sum assured or investing the corpus towards your investment fund. Thus, you can dedicate an additional amount to earn better returns.
Myth 6: ULIP Policies Are Expensive
If you were to compare ULIPs with other insurance policies, you would find that the latter doesn’t offer you the opportunity to invest your money. A part of your premium goes towards the chosen funds to earn returns. By staying invested in your plan, you can gain high ULIP plans returns that isn’t possible with other policies. To get an affordable plan, opt to buy a policy online!
Now that you know what ULIP policy myths are and have them fact-checked, you can finally choose to buy one. First, you must utilise the ULIP calculator to estimate your premiums and plan your returns for the long term!