ULIP plans are one of the most versatile and flexible financial products offering life insurance and investment benefits. However, there are many myths and misconceptions about ULIPs that prevent people from taking advantage of this product. In this post, we will debunk popular misbelieves about ULIP plans that you must not trust.

Common ULIP-related Misconceptions

To understand what is ULIP in detail, let’s look at some common misconceptions.

Misbelieve 1: ULIPs are expensive and have high charges

One of the most common misbelieves about ULIPs is that they are expensive and have high charges. That is not true. ULIPs have become more affordable and transparent in recent years, thanks to the regulatory changes by the Insurance Regulatory and Development Authority of India (IRDAI). The charges for ULIPs are capped at 2.25% for the first year and 1.35% for the subsequent years. Moreover, these charges are deducted from the fund value and not from the premium, which means that you get the full benefit of your investment.

Misbelieve 2: ULIPs are not secure and do not offer adequate life cover

This is also false. ULIP plans are secure and offer adequate life cover. They are regulated by the IRDAI, which ensures that the insurers follow the rules and guidelines. ULIPs also provide a minimum sum assurance of 10 times the annual premium, or 105% of the total premiums paid, whichever is higher. That means your beneficiaries will receive a lump sum in case of your unfortunate demise, which can assist them in meeting their financial obligations and goals.

Misbelieve 3: ULIPs are not suitable for long-term goals

Some people think ULIPs are unsuitable for long-term goals, such as retirement, a child’s education, or wealth creation. This is also a misbelieve. ULIPs are designed to help you achieve your long-term goals. They offer the dual benefits of life insurance and investment. ULIPs also provide flexibility regarding premium payment, policy terms, and fund selection. You can choose a ULIP plan that matches your goal, horizon, and budget. ULIPs further offer tax perks under Section 80C and Section 10(10D), which can help you save more in the long run.

Misbelieve 4: ULIPs are not transparent and have hidden charges

Some people believe that ULIPs are not transparent and have hidden charges. This is also a false notion. ULIPs are among the most transparent financial products, disclosing all the costs, fees, and commissions upfront. You can also track the performance of your ULIP plan online and get regular statements and reports. ULIPs also have a free-look period of 15 days, during which you can cancel your policy if you are not satisfied with it and get a refund of your premium after deducting some charges.

Misbelieve 5: ULIPs are not flexible and have rigid rules

This is also a common misconception. ULIPs are one of the most flexible financial products, offering various options and features to suit your needs. You can choose the premium amount, payment frequency, policy term, fund option, and sum assured at your convenience. You can also switch between funds, make partial withdrawals, increase or decrease your sum assured, and top-up your premium as per your changing needs. ULIPs also allow you to revive your lapsed policy within a specified period, subject to some conditions.

Misbelieve 6: ULIPs are not diversified and do not offer multiple fund options

This conception is also untrue. ULIPs are diversified and offer multiple fund options, ranging from equity, debt, and balance to money market funds. You can choose the fund option that suits your risk profile and investment objective. You can also spread your portfolio by investing in more than one fund option and rebalance your portfolio by switching between funds as per the market conditions and your changing needs.

Misbelieve 7: ULIPs are not user-friendly and have complex features

This is also incorrect. ULIPs are user-friendly and have simple features. They are designed to cater to the needs of the customers. ULIPs are easy to understand, buy, and manage. ULIP plans offer online platforms and tools to help you make informed decisions. You can compare different ULIP plans, calculate your premium, check your fund performance, switch between funds, withdraw, and renew your policy online without hassle. You also get customer support and guidance through various channels.

Conclusions

ULIPs are unique financial products. It is important to understand how ULIP works so you can compare and pick the ideal plan. It is worth mentioning that ULIPs offer many value-added services. They also offer various value-added services, such as loyalty additions, fund boosters, riders, and bonuses. Given all these features, a ULIP plan can be a good addition to your overall financial and investment portfolio. Investment and life cover along with tax benefits make ULIP plans a popular choice among investors.