Debunking the most common ULIP Myths
Life insurance was never an attractive investment avenue, not for millennials at least. The common notion that surrounds a life insurance policy, is that it loses its worth due to inflation. Moreover, complicated documentation while purchasing a policy is also one of the main reasons why investors refrain from buying an insurance cover. Nevertheless, the scenario has drastically changed after ULIPs were introduced. ULIP or Unit-linked insurance plan is a unique product offering both insurance as well as investment benefits. The premium that you pay is further invested in money making securities thus generating profit for the policyholders.
There are several myths surrounding ULIPs. The below blog post will debunk the most common myths. Also, there are listed reasons why you should definitely invest in Unit linked insurance plans. Read on!
ULIPs are expensive:
This myth is backed by a valid fact. The fact is that prior to 2008, several premium allocation charges were levied on Ulips. The charge structure made it difficult for a common man to afford the investment in Ulips. However, Post 2008, IRDA (Insurance regulatory authority of India) changed the charge structure and reduced premium allocation charges. So, as far as the current scenario is concerned, even a middle-class salaried individual can afford to invest in ULIPs. In fact, it is the only insurance plan that offers investment benefits as well.
Lock in period of 3 years:
This is rather a result of incorrect information than a myth. Lock in period of ULIPs was changed from 3 years to 5 years post-2010. The lock-in period implies that you won’t be able to withdraw the money before the maturity of the policy. This step was initiated in order to distribute the investment over a long tenure thereby making it a more affordable product.
Insurance cover is low:
Life insurance coverage totally depends upon the amount of premium you pay. So, if you are willing to pay a higher amount of annual premium, your insurance coverage can be 40 times the annual premium paid. Moreover, irrespective of market volatility, a plan with efficient insurance cover will ensure sum assured even if funds invested in securities are not performing well.
If you too, believed the above-mentioned myths to be true, I hope we have given you a reality check. Ulips are considered as one of the smartest investment options available today. Whether you want to save taxes, avail protection or invest, ULIPs offer everything in a single plan. Investment in ULIP will save you from the trouble of managing a portfolio with multiple options. Furthermore, you don’t have to pay any commission to middleman or agents, as ULIPs are easily manageable investments.