Unit-linked insurance plan or ULIP -- a life insurance product -- offers risk cover for the insured together with investment options. It is linked to the capital market and offers the flexibility to invest units in equity or debt funds depending upon the risk appetite.
At maturity, ULIP policyholders get back the investment portion of the policy.
Like any other investment made by investors, the risk of fluctuation due to market volatility is to be ensured by the policyholders in the case of ULIP.
Here are some FAQs related to ULIP investments (The responses have been compiled by Naval Goel, CEO, PolicyX):
Who should invest in ULIPs?
Those who are planning to start their family or those who are near retirement and able to bear the market risk should invest in ULIPs. It will help them in gaining huge returns. Individuals who have just started their career should start with a balanced fund option for lower financial risks.
When should one invest in ULIP? Is there a right time to do it?
As per the industry experts, every time is the right time to invest in a ULIP, including the current phase where markets are in recovery mode.
When and how should one withdraw the ULIP fund?
ULIP is basically a long-term investment plan. A person can withdraw ULIP after 5 years. However, it is advisable to not withdraw during the lock-in period.
To reap the huge benefits, a person should stay invested for a long period of tenure such as 15-20 years. The risk-cover ULIP will cease when one puts a surrender request, however, the surrender value incurred is paid only at the end of the 5-year term.
When should one go for top-up premium in ULIPs?
A person can go for a top-up only if the regular premiums are paid on time during the policy tenure. And, if the top-up premium doesn't exceed 25 percent of the normal premiums paid until that time, investors will not have to purchase insurance with the top-up premium.
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