Unit Linked Insurance Plans (ULIPs) are a contemporary insurance-cum-investment product that are provided by insurance companies. In case of ULIP, the premium paid by the policyholder is utilized for two purposes. A small portion of the premium goes to secure life cover, whereas the remaining amount is utilized for investment in the funds. This dual-purpose, served by ULIPs, gives them an edge over other investment options available in the market. Depending upon your risk appetite, you can choose your funds: Growth, Equity, Asset Allocation, debt, etc.
In case of a ULIP plan, the policyholder also has an option of switching funds during the term. ULIPs can prove to be an ideal option for goal-based investment. Since at different stages of life, you may have different financial goals, it is essential to invest your ULIP funds according to your age. Below, we will have a look at how you can modify your ULIP policy by balancing risks and returns at your age.
Policyholders in the age group between 20s and 30s:
If you belong to this age group, you’ll be having fewer financial responsibilities. You are most likely to get your first job in your early 20s, and hence, you can afford to take risks while investing in funds.
Since you are more likely to have a high risk appetite in your 20s, your investment in ULIP should be heavy on equity funds, i.e. around 75-80% of equity funds.
Policyholders in the age group between 30s and 40s:
While choosing funds in your 30s, you must try to maintain a balance of both equity and debt. This is because, in your 30s, the financial responsibilities may add up, and you may have goals such as purchasing a house, getting married, etc.
To cater to your financial liabilities, while keeping your capital safe, you may consider increasing your investment in safer assets such as debt funds, whereas simultaneously reducing your dependence on equity.
You can consider reducing equity funds to 60% and simultaneously increasing your investment in debt and cash to 25% and 15% respectively.
Policyholders in the age group between 40s and 50s:
In this age group, you may have children to take care of and, perhaps, your parents who may need your financial support. Thus, your financial liabilities will further increase between your 40s and 50s.
Therefore, it is advisable that you must opt for investment with moderate risk. Your investment should be more focused on debts funds when you approach your 40s.
Policyholders in the age group between 50s and 60s:
At this stage of your life, you would be approaching your retirement but not quite there. In your early 50s, you may still be earning and be at the peak of your career. At such an age, you would not need regular income from your investments. Try debt funds, especially corporate bond funds and banking & PSU schemes. By investing in high-quality debt instruments, you can reduce the chances of loss. After 60, you can opt for a systematic withdrawal of your ULIP plan returns to get yourself a regular income from it. Therefore, investing in debts and bonds is one of the finest investment schemes for senior citizens.
Investing in ULIPs by balancing risk and returns can help you lead a financially stable life. ULIPs are a much attractive product as compared to what they were a few years ago. Costs such as premium allocation charges, administration charges, surrender charges and fund management charges made ULIP plan an expensive affair. However, recently, some low-cost ULIPs have been launched, wherein over a long investment horizon, the costs are highly reasonable. It is essential to conduct proper research before investing in ULIPs. While investing in ULIP, in case of any query, you must seek the help of a financial advisor.
