Buying insurance or investing your hard-earned money can sometimes be a daunting task. Hence, checking the fine print and ensuring that the policy doesn’t have any hidden agendas should be your top priority before you invest. Some of the policies in the market seem too good to be true. The fact is that each policy comes with its pros and cons, and you definitely need a good advisor like Finserv Markets to tell you what best fits and suits your needs.
To give you a brief idea, you could opt for an all-out investment scheme that gives you fixed returns, an insurance policy that guards you against calamities, a mutual fund investment that yields great returns or simply purchase a ULIP plan that does the dual work of an insurance policy and investment plan. Since ULIP is fairly new in the market, there is a lot of speculation about its benefits. With the ever growing digital age, a number of myths have been formed about ULIP.
So what are these myths? Let’s look at the most common ones:
ULIP plans are expensive and carry hidden charges: Your ULIP premium is divided into life insurance and wealth management or investments. Post 2010, the IRDA has regularised the charges, so insurers need not bear the brunt. Some of the key charges on your premium include policy administration charge, fund switching charges, fund management charges etc.
ULIPs are risky: They are as risky as you want them to be. ULIP plans offer many permutation and combination of funds, like debt only, balanced and equity only. You can choose the risk percentage as per your convenience, needs and risk appetite.
Switching funds incurs a sizeable fee: This depends on the company you go with. Most insurance companies allow 24 free switches in a year. Check this fact before investing.
Exiting a ULIP is tough: It is advisable to invest in a ULIP for a medium or long term tenure to reap maximum benefits. However, if you do wish to exit before the policy matures, ULIPs do not levy any exit charges.
Life cover is market dependent: This view is incorrect. Market tendencies or dynamics do not affect the life cover offered by the ULIP plan. This amount remains constant and you can be rest assured of availing the amount that was projected and agreed upon at the time of purchase or investment.
Extra funds cannot be invested at a later time: There is no such restriction. You may choose to invest any surplus funds in your existing ULIP policy and avail tax benefits as usual. ULIP investments are tax free under Section 80C of the Income Tax Act, 1961. Not only this, the returns on policy maturity are also exempt from tax.
Hope we’ve been successful in busting some of the myths surrounding ULIPs. Be sure to check ULIP plans online to make an informed decision today!