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Things to Consider While Buying ULIPs

  • Highlights

  • Define the purpose of buying a ULIP

  • Know the underlying assets

  • Estimate the required life cover

  • Choose the convenient premium payment method

Weaving insurance and investment into a single product, a unit-linked insurance plan (ULIP) is a prudent financial tool for you to achieve your long term goals of financial security. Apart from life cover and wealth-creation, ULIPs also offer tax benefits. However, before buying a ULIP, it’s essential for you to consider the following factors:

Evaluate your financial goals

You must evaluate your financial needs and goals before investing in ULIPs. For example, whether you are planning to build a corpus for retirement or accumulate funds for your child’s higher education. You should also consider your pre-existing financial obligations and objectives before buying.

Know the underlying assets

Gain knowledge about the underlying assets of a ULIP. ULIPs invest in a range of funds of varying risks and gives you the option to invest in assets depending on your needs and risk appetite.

If you are an aggressive investor, you can choose ULIPs investing in equity funds. On the other hand, if you are a moderate or conservative investor, you can choose ULIPs where most funds are either balanced or debt in nature.

Premium amount

The cost of a ULIP depends on various applicable charges such as mortality charge, fund management charge, switching charge, and partial withdrawal charge among others. All these have a say on the premium amount.

Prior purchasing a ULIP, know the premium amount you need to pay. Also, note that being a long-term product, you need to remain invested for at least 10-15 years to enjoy the real benefits.

Premium payment options

Choose a ULIP that gives you the option to pay the premiums as per your convenience. Generally, ULIPs offer these premium payment options:

- Single premium payment where the entire premium is paid upfront as a lump sum
- Limited premium payment where you can choose to pay for a limited period of the policy term
- Regular premium payment where you need to pay the premium over the entire term of the policy

Before committing, read the fine print carefully to understand the various terms and conditions associated with investment in a particular ULIP. Know the applicable charges you need to pay, in case you wish to close it before maturity.

Secure yourself today with insurance from Bajaj Finserv

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