A Unit-Linked Insurance Plan (ULIP) has undergone drastic changes in its framework for your betterment in the long run. After the introduction of new guidelines, a ULIP plan can become a go-to investment option for many of you. Being a combination of investment and insurance, a ULIP policy can allow you to participate in the capital market as well as protect your loved ones financially.
Since a ULIP plan is a long-term investment, you should pay the premiums regularly to meet your life goals in the future. While a specific proportion of the premium can go towards life coverage, the other half can be diverted towards your funds. Typically, a ULIP plan can allow you to select the type of funds based on your risk appetite and investment goals. When you invest in a ULIP policy, you can choose between the two funds mentioned below:
- Equity Funds
Equity funds are risky funds that can help you to gain relatively high ULIP returns based on market performance. However, you should invest in equity funds if you can bear the risks of the market. Ideally, you should choose equity investments when you are young and when you have minimal financial responsibilities.
- Debt Funds
Debt funds can be less-risky. However, it can provide you with relatively low ULIP returns in comparison with equity funds. As a policyholder, you should opt for debt funds when you grow older. At an older age, you might have the responsibilities of your spouse and children; hence you might not be able to handle the market risks.
While selecting the types of ULIPs, you should analyse your risk tolerance and make an investment accordingly based on the market fluctuations. The total monetary worth of the units that you own is known as the fund value. Typically, you can calculate the fund value by multiplying the Net Asset Value (NAV) of every single unit by the number of units you hold.
Before purchasing a ULIP policy, you should use a ULIP calculator to determine the premium amount as well as returns that your selected fund can generate. A ULIP calculator is an online tool, which can let you understand the total amount you might require for a ULIP investment as well as know the expected returns from your desired fund. To use a ULIP calculator, you might not have to be a tech-savvy person but you should follow these steps mentioned below:
- Log on to the online website of your insurance company to get access to the ULIP calculator.
- Submit the relevant details such as your name, date of birth, gender, smoking habits, and so on.
- Enter the details of your ULIP policy.
- Fill the premium amount or your total invested capital that you wish to park into your funds. While entering the premium value, select the premium payment mode as well. A ULIP policy can let you pay the premium quarterly, monthly, half-yearly, or annually based on your convenience.
- Choose the tenure of your selected ULIP policy. While choosing the term of your ULIP investment, see to it that your life goals are met within the selected period.
- Pick the type of fund that you wish to invest your money in based on your risk tolerance, market fluctuations, and investment goals. You can also switch to a different fund since a ULIP policy offers you a switching feature.
- Calculate the estimated returns based on the submitted information on the online portal.
In a nutshell, the choice of your fund can play an essential role throughout the due course of your ULIP policy. After you make the selection of your funds, you should keep a tab on your investments regularly. That way, you can understand how to calculate the fund value under a ULIP policy.