When you begin looking for insurance, you have to learn the terminology, including the Unit Linked Insurance Policy or ULIP. These policies combine life insurance and mutual funds into one product. If you purchase a ULIP, you get to enjoy the benefits of insurance coverage with investments in the stock market.
Insurance can be costly, but these tips will help you save money when you choose a ULIP. Not only can you save on the premiums, but you can also save money for the future.
Buy ULIPs online
When you buy a ULIP online, you can save up to 20% off of the cost of buying directly from an agent in person. When you shop online, you can compare your options and find the one that best fits your needs. You can also watch your ULIP online as the market moves. The online price is less because you bypass having to pay commissions and salaries of people who work in insurance offices.
Look for low cost and high return
Playing the market can be tough, because you never know what to expect. When you decide to invest in ULIPs, you do so with the plan that you are going to keep it, so your investment can grow. Some agents try to talk investors into buying a low-cost policy that does not offer high returns. You want to find a product that fits your lifestyle, but also has a history of giving notable returns. When you buy a ULIP at a young age – say in your 20s or 30s, you have a better chance of getting more money in return. If you buy when you are over 50, you might have to pay a high mortality charge.
Plan for the long term
If you are expecting to get rich quick with an ULIP, you are mistaken. You have to be patient, just like you would with mutual funds. Most people do not see respectable returns from their ULIPS for 12 to 15 years. While you wait for those 12 to 15 years, you will see the market go up and down. Prepare yourself for the volatility of the market, and let the investment do its job.
You can make changes to your ULIP if needed. You can choose a debt fund or equity fund and move between the two. These opportunities can help you maximize your investment with the goal of making more money.
Before you invest in a ULIP, look at how much you can afford and how it will reduce your taxes. You can pay up to 1.5 lakhs and deduct the premiums from your income tax. Look at section 80C of the Income Tax Act 1961 for all of the rules and regulations. There are specific rules about how much you can deduct and much of it is based on your tax bracket. Some experts advise getting a ULIP at the highest premium you can afford, because the tax benefit is so strong.