A unit-linked insurance plan (ULIP) acts as a plan for investment as well as insurance. The returns from your investment can help you finance different long-term goals like higher education, travel, marriage, retirement, home renovation and more. After picking the best ULIP policy, you must take some other steps to maximise your returns. Here are some great tips for that.
Set Your Financial Goals
Fix your financial goals well in advance. Thus, you can get more time to choose a suitable investment term and funds, invest in them and save in a disciplined manner to reach your target.
For example, you wish to save for your child's higher studies that he would pursue after 10 years. In that case, pick a 10-year ULIP.
Invest Over a Long Tenure
A unit-linked insurance plan is a long-term investment plan that can yield better returns if you invest over a long period. Although a ULIP has a 5-year lock-in period, avoid withdrawing your money after this duration. That could affect your overall earnings. Consider withdrawing only if you have a financial emergency. The longer you remain invested, the more your money can grow with the power of compounding.
Invest Consistently
This is as important as choosing a good ULIP policy. Some insurance companies reward long-term consistent investors by repaying them some fees like surrender charges, mortality charges, fund management fees, policy administration charges and more. Some of these charges may be waived if you don't make partial or full withdrawals from your plan. These can add to your aggregate returns.
Switch Between Funds As and When Required
See if the insurance provider lets you switch between funds a number of times annually. Depending on the market's ups and downs, you can move to the appropriate fund to boost your returns. You can invest in equities in a bear market. You can switch to debt funds when prices start going up.
Consider Your Risk Appetite
As your financial responsibilities increase with age, your risk appetite can vary as well. Young investors can afford to go aggressive. As you near retirement, you might choose more conservative investments to safeguard your corpus.
A unit-linked insurance plan allows you to switch between funds as your risk appetite keeps changing. If you have a very low risk tolerance, you can invest more in debt funds. When your risk tolerance rises, you can move to equities for higher earnings.
If you wish your portfolio to comprise both low-risk and high-risk options, go for balanced/hybrid funds. They can help you enjoy moderate returns with moderate risk.
Leverage ULIP Tax Benefits
As per Income Tax Act, Section 80C, your premium payments to a ULIP plan qualify for tax deductions. Under Section 10(10D), you can claim tax exemption if the overall annual premiums are less than ₹2,50,000. You can maximise your earnings by leveraging these tax savings.
Make sure to opt for the best unit-linked insurance plan from a renowned insurance provider in India. After that, follow the above-discussed tips to optimise your earnings from the investment plan.
