Tips To Choose The Best ULIP Plan For Investment

Being savvy and monitoring your own fund has its own pros and cons. However, many people rely on experts for their fund management but having a proper understanding of the market can really help you to gain maximum returns.

Well, if we talk about ULIP Plan then it is the most cost effective way of entering the equity market. Not only this, ULIPs also offer a dual benefit of insurance cum investment where an individual can invest in highest rated debt instruments. So, with features like transparency and flexibility ULIP Plans are one of the best long term investment instruments that offer numerous fund options to meet the requirement of the insurance seekers.

The customers can choose from the array of options provided by ULIP where they can invest their premium in well-established investment fund of insurance companies. One can make most of ULIP Plan for higher returns just by following few simple steps.

1. Optimizing Asset Allocation- Asset allocation is defined as the primary determinant of return and risk in a portfolio. The asset allocation helps the investors to create a diversified portfolio by investing across different asset classes. One of the benefits of optimizing the asset allocation and investing in different asset classes is that the loss of particular asset class gets compensated by the profits made on another asset classes. Thus, it minimizes the overall risk of investments.

Moreover, an individual can fruitfully manage their asset allocation portfolio by selecting the options of free switches between funds. With the help of free switches the insured can change their investments between different asset classes like debt, cash and equity depending on the financial goals and risk appetite of an individual.

2. Selecting Between Debt and Equity Funds- According to one’s risk appetite and according to the performance of the asset class one must select between debt and equity funds. Each asset has different characteristics of returns and risk for example: equity schemes offer higher returns but also have higher risk appetite on contrary to this debt funds offers lower risk and lowest return over a long term period. However, the investment made on debt strengthens the portfolio and assures returns by reducing the risk. By analyzing the risk appetite of an individual and life stage requirement one must choose between the equity and debt ratio.

3. Life Stage Requirements- Depending upon the different stages of life the risk appetite of an individual’s varies and with the help of return aspiration the insured needs to balance the profit and loss made on investment. As an individual hits his/her retirement age the financial obligations of an individual increases and so they tend to get more risk averse. In the old age it is wiser to intuitively switch to debt and less risky cash funds as compared to more risky equity funds.

4. Look for Options of Semi- Controlled Switching- A lot of policyholder don’t know how to manage the asset allocation of their portfolio or actively monitor the fun movements. So for the better understanding of the insured ULIP Plan offers semi-controlled fund management opportunity. According to the set of instructions provided by the insurer the options to switch funds automatically are set. Semi controlled switching option can also be used to initiate programmed switches every month. On a particular date as set by the insurer the insured can switch monthly a fixed amount from one fund to another fund. The insured owner can choose the fund option from which the amount is to be switched and the fund to which it will be credited.

While investing in ULIP Plan few charges are deducted at the time of entry. These charges include fund management charge, policy administration charge, mortality charge, surrender charge, etc. Some of these charges are paid back to the insured as loyalty addition. As the invested amount of the policy holder gets locked for a 5 year period, this results a higher return on investment in the long run.

As a protection plan, on the demise of the insured person during the tenure of the policy, higher of the fund value and the sum assured is paid out as a death benefit to the beneficiary of the policy. Secondly, the fund value is paid out to the policyholder during the maturity of the policy.


In simple words, ULIP can be described as an expert fund management that offers different investment strategies to multiply the fund options of an individual. With its versatile features and uniqueness of providing the triple benefit of high return, life cover and Tax Saving Investment with minimum risk of losses ULIP Plan is certainly one of the best investment tools to achieve the long-term financial goal.

2 thoughts on “Tips To Choose The Best ULIP Plan For Investment”

  1. DivHut, I haven’t read about or considered these types of plans for a long time. It is a good refresher. I tend to try and self insure (within reason) as much as possible and also like to manage my own investments. Given these factors, ULIP Plans probably are not for me. For the right person/situation, they are a good option to consider. Tom
    Tom @ Dividends Diversify recently posted…The Lights Are on But No One is HomeMy Profile

    • Hi DD,

      Quite honestly I had no idea what a ULIP plan was till about a week ago. Looks like an instrument that I won’t be utilizing but it may have benefits for others. Thank you for stopping by and commenting.


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