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6 Tips to Maximize your Gains from ULIP

October 27, 2022


In this policy, the investment risks in the investment portfolio is borne by the policyholder

One of the fast-growing popular financial products, as far as life insurance and investment goes, is a ULIP. Holding dual advantages, this is a long-term investment scheme and the plan has a distinct edge above others. Not only does it offer you safety for your family as it provides lifelong security in the event of your demise, but it lets you have the chance to create wealth via investment.

Every investor’s first thought regarding investment is the expectation of gainful returns. This requirement can be fulfilled with a unit linked insurance plan or a ULIP. Investors always look for means to get the best returns possible. It’s possible to maximize returns if you follow some simple strategies. If you can maximize your ULIP, you can build your corpus while giving your family protection in any eventuality.

1. Start Investing as Early as Possible

Ask any investment expert and they will tell you that the ideal time to begin investing is “yesterday”. This essentially means that the earlier you start your investment path, the more you can earn in the long term. In the case of a ULIP, the sooner you sign up, the more you can maximize your ULIP. Early investment gives you the advantage of more of a time horizon to earn returns on investment. Additionally, with a ULIP, you can make the most of the compounding of your wealth when you invest. For instance, if you start investing a portion of your salary when you start employment, you are not just creating a good saving habit, but also building your wealth.

2. Try Maximizing the Amount of Investment

A good rule of thumb while investing in a ULIP is to invest a large amount, as much as you can, to begin with. If you can manage to put aside a substantial amount towards a ULIP, you can maximize your ULIP in terms of your returns. Regular investments of small amounts of capital over a long span build your wealth into a solid corpus.

3. Invest in Equity Funds

History tells us that investing in equity brings great returns, provided equity is held for the long term. There is also risk involved when you invest in equity, but this can be mitigated if you hold stocks patiently. In a ULIP, part of your plan represents an investment (in equity funds, debt funds or a blend of both) and the other part has to do with life cover. If you choose equity alone for the investment part, you may see good rewards, but this comes with related market-linked risks. There are ways that different ULIPs lessen the risk component in your plan and let you make great gains:

  • Fund Rebalancing - In order to diversify your fund portfolio in a ULIP and to maximise your ULIP, your funds can be rebalanced in such a way to give you reasonable returns. Investments can be made in a combination of debt and equity in different proportions to lessen the risk factor.

  • Reinvesting Returns - There’s another way to get the most of your investment part of the ULIP you sign up for. You can reinvest your returns or book profits if they exceed some threshold you set in advance.

4. Switch your Funds to Protect your Gains before Maturity

The variable of auto rebalancing of funds keeps investments in your ULIP portfolio almost protected from risk, but may not necessarily eliminate it. Along with auto rebalancing of your portfolio, you can use the facility of switching funds that ULIPs provide. Depending on your provider of insurance, you can make efficient use of this to lessen your risk even further. What this essentially does is that, when there is a certain potential risk from markets, your capital allocation is automatically switched to a liquid or debt fund. This can reduce risks related to market fluctuations and give your portfolio a boost to maximize your ULIP at maturity.

In ULIPS, such a fund switching mechanism automatically gets activated four years before your ULIP policy is about to mature. This is to make sure that your funds are kept safe from volatility in the markets, and you earn without risks till your maturity date arrives.

5. ULIPs Help Maximize Gains for Safe Investors

If you value safety in investment over the risk of high rewards that come with equity funds, you can ensure that your investment still grows substantially. Many investors shy away from market volatility due to a low risk appetite and don’t want unnecessary stress. In such cases, you can achieve significant returns if you invest in debt funds that are low-risk. You also have the choice of remaining invested for a long time and this will lessen risk variables.

Furthermore, in the event you hold the policy for long enough, this entitles you to specific benefits. You get loyalty bonuses from insurance providers that show policyholders appreciation for carrying on with the policy. These often take the form of a percentage of the value of funds in ULIPs. Some of these bonuses are time-bound. For instance, if you stick with your policy for a period of five years, you can avail of bonuses and maximize your ULIP (in some ULIPs).

6. Avoid Partial Withdrawals from your ULIP Fund

ULIPs give policyholders the options of the partial withdrawal of funds. If you stay I vested for a minimum tenure of five years (lock-in duration), you can make partial withdrawals from your plan. Nonetheless, if you execute this option, you stand to lose out on your total maturity payout. You also lose out on the compounding effect of your investment to grow your wealth over time.

End Thoughts

You can maximize your ULIP in a number of ways that give you the advantage of collecting wealth. You also get the advantage of life insurance cover and are free from worry concerning your loved ones. Such dual advantages can only be appealing to the most serious investors.

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ARN - ED/09/22/29667

The Unit Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of fifth year.

For more details on risk factors, associated terms and conditions and exclusions please read sales brochure carefully before concluding a sale. Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. HDFC Life Insurance Company Limited is only the name of the Insurance Company, The name of the company, name of the contract does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document of the insurer. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.