If you have defined a long-term financial goal to secure your family in case of your absence and create wealth from market-linked returns, you must have invested in the Unit Linked Insurance Plan(ULIP)! While ULIPS allow you to earn market-linked returns, it is important to ensure that you have taken steps to protect the investments that you have made.
So, have you made enough efforts to protect your ULIP investment? If not, here are a few ways to do so.
- Switch Funds at the Right Time
Switching between the funds in a ULIP plan is a key benefit. Based on your risk profile, you can invest in equity funds if you can afford a high risk, debt funds if you are conservative and looking for safe investments, and hybrid funds if you want to strike a balance between risk and safety.
Insurance providers offer a range of funds for different types of investors. For instance, with the Tata AIA ULIP plan, you can choose to invest in any of the 11 different fund options provided by their expert research team.
However, you can switch to a different fund when you prefer to do so based on your requirements. While switching is a great advantage, the time of the switch is critical to protect your ULIP policy.
Here are two different scenarios that suggest the best time to switch between the funds.
- Economic downturns – When the financial market gets affected due to a bad economic downturn that might last for a few months to years, you can consider switching to a safer fund to protect your investment.
- Different life stages – When you invest in ULIP early in life, you can probably start with choosing the equity funds. However, with time, as you get married, your commitments will increase, and you prefer safe investment funds. In such cases, you can switch to a hybrid fund. And, as you approach retirement, you can choose to invest in a debt fund so that it remains secure until maturity.
- Be Aware of the Market Movement
When you choose ULIP as an investment option, you need to be updated with the financial market movements. You should keep assessing the different factors affecting the fund value and take the necessary actions. If you have purchased the online ULIP plan, you can make the necessary changes online instantly and cost-effectively from the comfort of your home or work.
- Seek the Help of Fund Managers
If you feel you are always preoccupied with work and cannot make the necessary changes to your ULIP plan as required, you can always opt for automatic switching. Your fund managers will keep assessing your profile and take the necessary steps to switch between the funds as desired based on your requirements.
- Invest for the Long Term
The ULIP policy provides high returns in the long term. So, as it is based on the financial market movement, any temporary factors that affect the fund value will be negated in the long term. Therefore, plan to choose a longer policy duration.
Also, the ULIP plan has a lock-in period of five years, after which partial withdrawal becomes applicable. However, if you wish to protect your investment and earn higher returns, you should try not to withdraw the funds until maturity and not decide to surrender it anytime as well!
ULIP plans provide the advantage of securing your family in case of your unexpected death and also help you with increasing your wealth based on market-linked returns. And, if you want to protect your investment, choose the right fund and make the necessary switches between them on time. Keep yourself updated about the market conditions and take appropriate actions to avoid a downfall. You can also take the help of fund managers to do the same if you cannot attend to it promptly. And, most importantly, choose a longer policy term and stay invested in protecting your investment for higher returns!