Unit-linked insurance plan is a unique combination of life insurance and market-linked investment. A single premium is used to provide financial cover to your loved ones in case of an eventuality and for the creation of wealth.
The insurance product offers multiple benefits, including a switch between funds, flexibility, partial withdrawals, tax* benefits, etc. But ULIP returns depend on choosing the right fund options based on your risk appetite. Read ahead and find out about the right strategy to choose fund options under a ULIP.
In a unit-linked insurance plan, the fund manager invests a portion of the premium you pay in equity, debt or a combination of both. The plan offers you the flexibility to choose between the funds according to your investment needs and risk appetite. You can invest more assets in equity funds if you have a high-risk tolerance.
On the other hand, investing in fixed income bonds or government securities can be chosen if you are risk averse. The ULIP funds you choose are not permanent and can be altered with the help of the switch feature. As your risk appetite grows, you can incline your investments towards equity by switching between the fund options. Whereas, when market volatility is high, you can switch your investment to more debt funds to gain stable returns.
You can choose any of the fund options in a ULIP based on your risk appetite and investment goals. The types of funds in ULIP are categorised into low, medium and high-risk, which are as follows:
Choosing the right type of funds of different best ULIP plans is important. This is because the ratio of funds decides your returns. A wrong combination of fund options and risk appetite can lead to losses instead of capital appreciation. So, evaluate the following before you choose funds under ULIP:
There are two mechanisms of allocating assets to different fund options. They are as follows:
So, this was how you could choose ULIP funds based on your risk appetite. Following the correct strategy for ULIP investment helps build an adequate wealth corpus to fulfil your long-dreamed goals.
Unit Linked Life Insurance Policies are a perfect option if you are looking for a life cover and an investment tool without the need to manage investments separately. Along with the benefits of suitable fund options, switching, and partial withdrawals, the premiums and maturity benefits of a ULIP are tax*-exempt under the Income Tax* Act. So, buy a suitable wealth builder plan with Tata AIA Life insurance company and secure your financial future today.
L&C/Advt/2022/Jul/1750