For instance an individual with a high risk appetite can opt for a ULIP plan with a higher equity component.
On the same lines a balanced fund ULIP will prove suitable for an investor with moderate risk appetite.
For sheer flexibility as also growth prospects, ULIPs deserve a look in.
6 steps to select the best ULIP
1.Go for the ULIP that offers a wide range of options across asset classes. So a ULIP with say eight fund options with varying allocations in equities and debt is a better choice than one with five options.
A wider range of options means you have a better choice of finding the most suitable plan/option for your risk profile and investment objective.
2.Buying insurance should be easy and the same holds true for ULIPs. Go for a ULIP that is easier to buy – like for instance over the internet.
3.ULIPs have earned a bad reputation over the years for higher charges. Charges are now closely regulated. Go for the ULIP with the lowest expense since this will reflect in returns over time.
The expenses can be compared easily enough since the information is widely available on company websites in a transparent manner.
A ULIP with a zero charge structure that only accounts for fund management and mortality charges is a good option. Opt for ULIPs that invest the entire premium, meaning the premium allocation charge is zero.
4.Go for ULIPs that offer more flexibility to choose the policy term. So a ULIP with a policy term of 5 to 20 years is better than a ULIP with a policy term of 10 to 20 years.
5.Look for ULIPs that offer flexibility in terms of premium payment options. For instance, certain ULIPs offer the single premium payment option or the limited premium payment option (5 years, 7 years, 10 years) or the regular premium payment option which is the same as the policy term.
6.ULIPs usually offer a death benefit that is the higher of the sum assured and fund value. There are some that offer a third option – a percentage of the premiums paid for instance 105% of premiums.
This means the individual gets the higher of the three amounts – sum assured, fund value and premiums. The greater flexibility is a good thing for the individual.