Jan 16, 2006 07:08 PM
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(Updated Jan 16, 2006 07:08 PM)
For those of you who think investments ..er..are not my cup of tea..I’d say dude!..time to wake up man! Inflation will get you to bankruptcy in a blink. I suggest investment now and reap later than living off the edge till posterity. In comparison to the frenzy attached to stocks and mutual funds and the impressive returns, they have offered in the past couple of years, investment avenues in the ULIP market (Unit Linked Insurance Plans) have hardly been in focus.
Can't blame them, though considering the fact that real return of interest that one earns on a majority of mutual funds/shares instruments may actually be quiet aggressive. Ever since unit-linked insurance plans (ULIPs) made their debut, they have become a subject of much discussion and debate. On the one hand, they were a trifle too complicated for individuals not yet exposed to the stock markets and were much-maligned because of the 'unusually high' costs. It was much after my brief stint as an intern with ICICI Prudential Life Insurance that I sincerely thought of giving some food for thought to ULIPs. What got me attracted to ULIPs were 2 things. Primarily “Insurance with Investments” ..I always thought of Insurance as a term plan… in a layman’s language “I die and my predecessors reap the benefits”..this sounded very thanda. Secondly, the whole idea of getting secured + investments (both aforesaid) AND LIQUIDITY.
These plans have a minimum term of 3 years..boy that got me hooked! 5-step investment guide that will aid potential investors in the selection process and enable them to choose the right unit-linked insurance plans (ULIPs). But before we get there, a little bit of gyaan on what ULIPs are More importantly ULIPs offer investors the opportunity to select a product which matches their risk profile; for example an individual with a high risk appetite can shun traditional endowment plans in favour of a ULIP which invests its entire corpus in equities. Investors have the choice of enhancing their insurance cover, modifying premium payments and even opting for a distinct asset allocation than the one they originally opted for. Also if an unforeseen eventuality were to occur, in case of traditional products, the sum assured is paid along with accumulated bonuses, conversely in ULIPs, the insured is paid either the sum assured or corpus amount whichever is higher. 1. ULIPs – Conceptual Clarity Do as much homework as possible before investing in an ULIP.
This way you will be fully aware of what you are getting into and make an informed decision. More importantly, it will ensure that you are not faced with any unpleasant surprises at a later stage. Gather information on ULIPs, the various options available and understand their working. Read ULIP-related information available on financial Web sites, newspapers. magazines, sales literature circulated by insurance companies and last not but not the least talk to people who have invested in one. 2. Understand your need and risk appetite Identify a plan that is best for you. Your risk appetite should be the deciding criterion in choosing the plan…you should be clear as to whether you are risk averse or a risk taker. As a matter of fact, if you have a high risk appetite, then an aggressive investment option with a higher equity component is likely to be more suited. Similarly your existing investment portfolio and the equity-debt allocation therein also need to be given due importance before selecting a plan. 3. Evaluate ULIP products from various insurance companies Compare products offered by various insurance companies on parameters like expenses, premium payments and performances.
Compare the ULIPs' performance, find out how the debt, equity and balanced schemes are performing. Enquire about the top-up facility offered by ULIPs i.e. additional lump sum investments which can be made to enhance the policy's savings portion. Find out about the number of times you can make free switches from one investment plan to another. Some insurance companies offer multiple free switches every year while others do so only after the completion of a stipulated period 4. Select the right Advisor Select an advisor who is conversant with the functioning of the markets and is independent and unbiased. Ask for references of clients he has serviced earlier and cross-check his service standards.
When your agent recommends a ULIP from a given company, put forth some product-related questions to test him and also ask him why the products from other insurers should not be considered. Be prepared whilst interacting, as there are many instances wherein the customer is taken for a ride and a lot of clauses are hidden earlier and erupt only after the policy has been purchased. 5. After Sale Be as involved with the Advisor as he is with your money. As simple as that!
