Something about unit-linked investment plans and what they are about
A unit-linked insurance plan, popularly known as ULIP, is an insurance policy that is linked to equity and is a part insurance and part investment. The growth of unit-linked insurance plans is based on the NAV (net appreciated value). Like a normal life insurance plan, a unit-linked investment plan covers a term that investors can decide and pay an annual premium. A part of the premium will go into paying for the insurance, and a part is combined with those of several investors and invested in stocks or bonds. A unit-linked investment plan allows investors to shift investments between stocks, bonds and combination funds.
Unit linked investment plans are multi-functional and can be invested in life insurance, retirement planning, marriage of daughters, education of children and other investments. While there is an element of risk to investors due to a part of the investment being equity inked, companies guarantee 14% return to investors over a 7 year period. This group has professional fund managers who keep shifting their investment capital from debt to equity in order to guarantee a minimum return to investors.
Unit linked investment plans have travelled a long way ever since the launch of the Unit Trust of India in the early 1970s. At that time, investors were wary of the stock market and the high costs involved during switching of funds from debt to equity and vice versa. Today, professional life insurance companies offer unit-linked investment plans and keep advising their investors when to shift from debt to equity and vice versa. There are regular updates, and investors get several notifications in a day.
Some of the best investment options include
A secure plan which allows an investment period from 7 to 55 years with a minimum premium of Rs 24000 to Rs 36000. There are no premium allocation charges, and there are 4 investment type switches allowed free every year. There is, however, a policy administration charge of Rs 100 per month.
There is another good unit-linked investment plan option out of the best ULIP plans to invest in 2021. This allows a plan of as little as 2 years upto 65 years. The minimum premium is Rs 50000, and there are 12 switches from debt to equity fund and vice versa in a year. The policy administration charges are less at Rs 40 a month.
A third option plan allows for term plans from 1 year upto 60 years. The minimum annual premium is Rs 25000, and unlimited switches are allowed in a year free of any charges. There are, however, premium allocation charges upto a maximum of 0.15% and monthly policy administration charges of Rs 33.33.
Another term, the ULIP plan offers even more flexibility in unit-linked investment options. A term plan can be as less as 30 days and can go on upto 60 years. The minimum premium payable varies from Rs 3000 to Rs 36000. There are unlimited switches allowed between debt, equity and other funds. There are no premium allocation charges, but the monthly policy administration charges are the highest at Rs 400.
The benefits
ULIP plans are a good investment with so much flexibility allowed by the unit-linked investment companies. There are some basic things investors need to take into account.
How to go about getting one
The first step to be taken is for the investor to evaluate his or her investment goals and then match them with the possible returns from a unit-linked investment plan to see if the goals are achievable. Investors should go in for a unit-linked investment plan only after this requirement is fulfilled.
Investors need to keep in mind that a unit-linked investment plan is a long term, and this is the reason why many unit-linked plans have a lock-in period of 3 to 5 years.
Investors need to have a good idea about stocks and bonds and how they are affected by the rising or falling sensex. Investors need to have a fair idea of when to switch from equity to debt funds though fund managers also offer regular advice.
Modern unit-linked investment plans are a good investment, and all investors need to have at least one.
