Recently there were several changes to the ULIP’s.But one should keep in mind that it’s core has not changed. They still remains as a long term investment cum insurance plans which always miss sells to customers. I always heard people talking that their investments are mainly in equity's which even give them insurance coverage for free. Yes they were being told like that by the agents. Final result will be that these huge entry loads ranging from 30 to 40% makes their investment un viable and this leads to false education regarding the entire equity investment. Let’s try to see who all and when all and what all things we should consider before investing in ULIPS.
Who should choose ULIPS?
A person who invests in ULIPS should be willing to invest in Equity’s. Choosing debt funds in ULIPS will be a tragedy as despite the high charges of ULIPS the returns from debt instruments will be too low, which may always result in a loss of your investments. The advantage of ULIPS is on the switching feature. So for the one who know the dynamics of markets he can switch from equity and debt as the BULL and BEAR side of market comes in to play.
Which type of plan is good for you?
The main problem of ULIPS is that the insurance converge is too low. Imagine getting 2 Lakh coverage when the total premium for first 3 years is 2 Lakhs and more. So to get the most of it, one should try to choose the plans which will give enough coverage as required for a longer period. Some even cover till 90 yeras of age.
Another problem is with the amount getting after the death of the insurer. Some ULIPs give either the fund value or the some assured..choosing which one is higher. Here a normal user should choose the fund which will give both the fund value and Sum Assured.
To enjoy the benefits of ULIPS, one should invest for at-least 10 years. Coz for the first 3 years the load charge are huge and negligible there after. Also should opt for plans which will have a good coverage as per your requirement. So if you are an investor who want a plan to save for your childrens college education in 10 years time...ULIPS are for you. For others please choose Mutual Funds or direct investments in Stocks.