What if we tell you that your insurance policy is not just a backup for your dependents, but it can also be treated as an investment plan if planned well. While many people would find a Term insurance plan as the safest way to ensure financial security for their dependents, some also believe in saving money for unpredicted future expenses, besides getting life insurance. For those who want to create a safety net for their dependents like aging parents or kids, there are some interesting ULIP plans that can give back good returns in the long run.
What is a ULIP plan?
A Unit Linked Insurance Plan (ULIP) is a mix of insurance and investment product. Therefore, it can be called as a perfect concept for savings as well as security. It not only provides life insurance but also uses your money into several market-linked products to get you long-term returns. For any individual, these long-term goals could be saving funds for a child’s education or for retirement. Since these products are linked to the market the money invested in such policies can get you good returns after maturity. Investing in ULIP also helps you beat inflation as the amount you get on maturity beats the average inflation observed over the years
There are different kinds of ULIPs available in the market, and depending on your financial goals like the growth of corpus amount, retirement planning, planning for the education of your children etc. you can invest in a long term or short term plan.
1. ULIPs for higher returns:
When you invest in ULIPs your money grows over a period of time, and if you die during that period your dependents will get a sum assured or a fund value (whichever is higher) as a death benefit. If you are planning to invest your money for higher returns, invest in equity-linked funds where the returns range from 12%-15% over a period of 10 to 15 years. Those who want to avoid market-risks can opt for debt ULIPs that offer returns in the range of 8%- 9%. The entire corpus that you get is tax-free.
2. ULIPs for various life stages:
If you are planning to get married or already married with children, then you better look for plans that fulfil your financial goals in the coming years. Start investing at an early stage so that in 18 to 20 years you build a decent corpus. For example, if you start investing INR 10,000 per month from today for the next 18 years, after maturity you will receive around INR 39,00,000 (calculated at 8% per annum; however, actual returns could be higher in the range of 12 to 15 % and might go up to INR 75,00,000 ) is the final amount which you can use for your child's education or marriage. In case the parent dies an untimely death, there are child plans like Aegon iMaximise 2 and Bajaj Future Gain that come with smart benefit options like annual income for child’s survival and future premiums are paid by the insurance company on your behalf. Whereas, with ICICI Prudential Smart Kid plan the insurer will only premium on your behalf till the maturity and the nominee will get a corpus amount.
3. ULIPs for retirement:
Those who want to build a good corpus for their life after retirement, they should go for ULIP plans which not only take care of the expected inflation but also give a decent return on the investment. A good way of investing in a retirement plan is to take your present monthly salary or income as a benchmark which you would like to have after retirement as well. For example, if you are earning INR 30,000 per month now and want to retire at the age of 60, you will require INR 97,000 per month after 30 years to maintain a similar lifestyle. This calculation takes into account an average inflation rate of 4 % per year. To get an annual pension of INR 97,000 you’ll require a corpus of at least 1 Crore for which you’ll have to invest INR 9,000 per month (approx. calculated at 8 % per annum). To maximise your corpus invest in equity funds of ULIP’s and get 12-15% return over the long term As you grow old, you can transfer your money to a debt ULIP to secure the maturity corpus from any market ups and downs.
So, now you know that insurance can be combined with investments, find out a suitable ULIP plan and invest to create a safety net for yourself and your family.
—by Santosh Agarwal- Head of Life Insurance, Policybazaar.com
