Making a decision about investing needs to be both fast and accurate. In hindsight, decisions always seem better, but investing cannot benefit from hindsight. Decision-making can be crippling, especially when there are so many options for investing, such as unit-linked insurance plans, bonds, debt, fixed deposits, term insurance, whole life insurance, equities, mutual funds, REITs, and more.
So how can you make sound, informed, and calculated investment decisions? The key is to be:
- Aware: Be aware of the various investment instruments available in the market. Understand each of them to a certain level. Learn which metrics to observe and examine to gauge the potential returns and risks involved with each instrument.
- Informed: Follow news from regulatory bodies, government, banks, and other institutes to stay updated about changes, modifications, and other updates that can help you reaffirm, or recant the investment decision.
- Talk to experienced folks and professionals: It may not be feasible for everyone to have a deep knowledge of all investment options. Talking to experienced individuals and professionals can provide insights and guidance for better decision-making.
Apart from these three factors, let’s look at unit-linked insurance plans and compare them with the available options:
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What is a unit-linked insurance plan?
A unit linked insurance plan simply means an insurance policy that covers your life and provides you with the capital appreciation form in the form of units that can be tracked by NAV.
It targets both, your life insurance and your investments.
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What is term insurance?
A term insurance is an insurance policy solely designed to cover your life till the policy tenure. Your beneficiaries receive the coverage amount if you expire during the policy term.
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What is whole life insurance?
The way it works is similar to term insurance, except that whole life insurance has a longer tenure and can cover the policyholder up to 100 years of age.
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What are mutual funds?
A mutual fund is an investment option in which you can invest a lumpsum amount or a SIP in a fund that invests your money in the markets.
You get an expert managing your money and generating returns on your behalf, and the fund receives a management fee as part of the income it makes. The investment portion of your unit-linked insurance plan operates like a fundhouse governed by IRDAI.
Let’s compare each of them to a unit-linked insurance plan:
- ULIP offers term insurance for the tenure of the policy. It takes away the stress of handling multiple policies and investments since ULIP contains both, investment and insurance.
- In comparison to a mutual fund, a unit-linked insurance plan offers tax benefits not only when you pay premiums, but when you get your returns as well.
- ULIP had issues earlier with long-term returns. However, but recent changes have improved their performance to be on par with mutual funds.
Owing to the above meanings and comparison, ULIP is a good option for investments. Consider your needs and invest money wisely.
