If you are a new investor who wants to achieve future financial goals, like building a corpus for retirement, sponsoring children’s education, buying a house, and generating abundant wealth, Unit-Linked Insurance Plan (ULIP) is an ideal investment alternative. Many people ask – “What is ULIP?”, as they are not sure about the various features and the benefits offered by this scheme.
ULIP is an insurance policy that provides the dual advantages of insurance and wealth generation in a single plan. You can invest your hard-earned money in equity or debt funds as per your financial aspirations and risk-bearing appetite. The performance of the equity market determines the value of your investment in equity funds.
While purchasing a ULIP policy, you have to decide whether to opt for a single premium plan or a regular premium plan. When compared to the single premium ULIP, regular premium plans, like a monthly payment policy, provide more benefits. One of the significant benefits of opting for monthly ULIPs is that it reduces the exposure of your investment to market inconsistencies.
Why should you make monthly investments in ULIPs?
Here are five reasons to invest in a ULIP monthly:
- Power of compounding
Compounding is one of the formidable features that can help you to grow your wealth. In this concept, the amount you have earned from your initial investment in equity or debt funds is re-invested to accumulate surplus wealth. To make the most of the power of compounding, it is advisable to invest in the right funds and start as early as you can to build a large corpus. Consider a monthly premium payment plan, as it is intended for the long term, letting your wealth compound and grow over time.
- Benefit of rupee cost averaging
When you opt for a monthly premium payment rather than the single premium ULIP, you can reap the advantage of rupee cost averaging. This concept offers you a chance to average the amount of investment. Here, you can purchase additional units when the market is bearish and lesser units when the market is bullish. Therefore, it allows you to spread the risk of your investment. You can make the most of your ULIP investment if you regularly invest, irrespective of the market’s performance.
ULIP enables you to choose the frequency of the premium payment. You can pay premiums in monthly, quarterly, semi-annually, or yearly installments. When you opt for a monthly fee, it reduces your financial burden to a great extent.
- Possibility to switch from one fund to another
One of the main advantages of investing in a ULIP policy is that you can shift your money from one fund to another based on the market’s performance. So, you have the liberty to switch your investment from equity to debt funds or debt to equity funds based on the market fluctuations. So, you can maximize your returns on investment. When you opt for a monthly premium payment plan, it becomes easier for you to monitor your ULIP investment performance. Therefore, you can transfer your investments from one fund to another if and when required.
- Achieving life goals
With the regular premium payment plan, you can build enough corpus to lead a financially stress-free life in the future. The amount you receive on maturity can help you accomplish your financial objectives, for which you had made this investment.
The month-to-month systematic ULIP investment can help you increase your wealth within a specific time frame. With the help of the various benefits like fund switching, power of compounding, tax savings, and wise investments, you can earn higher returns on investment and achieve your future monetary goals.