ULIP insurance products are unique in that they provide risk cover, while offering investment options to grow your wealth by putting a portion of your premium to work in the capital market. This is a combination of life coverage and investment under a single integrated plan. You have the freedom to manage both the investment portion, and the insurance portion of a ULIP plan based on your specific needs and choices. There are different types of ULIPs on the market that can help you to achieve your specific investment goals. While it requires careful consideration in choosing a plan, there are key parameters to compare when making a decision regarding which ULIP plan is best for you.
1. Premium Allocation Charges
Premium allocation charges related to ULIPs are deducted upfront as a certain percentage of the premium for certain initial expenses, including distributor fee, distributor fee, underwriting expenses as well as medical expenses, underwriting expenses and medical expenses. This is done at the time of the policy issuance. After the deduction of these charges, the remaining premium is invested in the funds of your choosing. It is important to compare premium allocation charges when choosing a ULIP plan, since the lower the premium allocation charge, the higher the premium investment amount. A plan that is not cost heavy will leave you with greater fund value.
2. Fund Options
The three basic ULIP funds offered by insurance companies are equity-based, debt-based and balanced funds, however, there are a variety of other options that align with your life insurance needs and appetite for risk, including income, fixed-interest and bond funds, as well as cash funds. Depending on the market conditions, you have the flexibility to change your chosen investment funds. When comparing fund options, it is in your best interest to consider plans that have higher fund options.
3. Premium Payments and Alteration Flexibility
A policyholder may want a certain level of flexibility regarding how to pay their premiums. You may prefer to pay the premiums for the complete duration of your ULIP plan, or you may want to pay premiums on a term selection basis, for a predetermined period. ULIP plan can offer you the flexibility to make changes to your plan, such as a ‘sum assured alteration,’ partial withdrawals, top-ups and switching. A ‘sum assured alteration,’ for example, allows policyholders to increase or decrease their chosen sum assured. This way you can choose a plan that matches your needs, providing maximum benefits and limited restrictions.
When selecting a ULIP plan that is best for you, it’s important for you to decide what a greater priority, investment or coverage. If you choose investment as the highest priority, then selecting a plan with the lowest sum assured will lower the mortality charges. ULIP plans also allow you to make both coverage and investment the focus, and a plan with coverage multiple would be a good option.
5. Fund Returns
ULIP plans by design are investment products and are attractive because of their return potential. You want your plan to grow, producing the highest returns from your chosen plan. Consider plans that have funds with consistent and steady performance, which can provide better returns in the long term and meet your investment goal.
Choosing the best ULIP plan for you requires assessing certain parameters, from premium allocation charges to fund returns. Keep in mind the structure of ULIP plans, along with the features and benefits offered when making a decision.
About Aegon Life
With a complete product suite of life insurance plans, superior technology, and customised service, Aegon Life Insurance Company Limited launched its pan-India operations in July 2008. As a joint venture between Aegon – world’s leading financial services and Bennett, Coleman & Company – India’s leading media house, Aegon Life Insurance adopts a local approach to facilitate customer interaction. Our vision to be the most recommended new age life insurance company has enabled us to leverage digital platforms that bring transparent solutions to customer needs. Our financial planning and investment solutions include term life insurance plans, pension plans, unit-linked insurance plans (ULIPs), health insurance plans, child education plans, and more.