In today’s world, the cost of living keeps increasing due to various factors. This has a serious impact on how we manage our expenses on a day-to-day basis. In such situations, increasing your wealth is an option, to be able to cope with an everchanging world economy and having a secured future. This can be achieved through investments. Among the popular instruments for investments to gain good returns, ULIPs and Mutual funds are some of the preferred options. While both help in getting good returns for the future, ULIPs offer better benefits over Mutual funds. Read on to know more about ULIPs and MFs and the benefits of ULIPs.
What is ULIP?
A unit linked insurance policy is a type of life insurance policy with dual benefits: investment and insurance. The premium that you pay for the policy is divided into two. One part is used for investments in different funds offered under the policy. These funds are equity and debt funds. The other part is used for the life cover. This policy is beneficial for you when you want to gain enough wealth to fulfil your life goals and also get a financial safety net for your loved ones.
What is a mutual fund?
Mutual fund is a type of trust, wherein money from individual investors as well as institutional investors is pooled in together to invest in different market-linked options. They are managed by fund managers, who make decisions as per the choice of investors. There are different types of mutual funds that you can opt for based on their risk factor, duration and market.
What are the advantages of ULIPs?
If you are wondering whether you should opt for ULIPs or mutual funds, here are few advantages that ULIPs offer over mutual funds:
As mentioned above, ULIPs offer both investment and insurance in a single policy. Investing in equity and debt funds helps you in increasing your wealth substantially in the long run. When you opt for a long-term policy, the returns could be greater. On the insurance part, your family gets death benefit, in the event of your untimely demise. This can help you family financially to take care of major expenses.
mutual funds are only opted for investments. Your money is invested in market-linked options, and you get returns after it matures. However, no insurance cover is provided for life risks. This means that you will have to rely on a separate policy to provide financial coverage for your loved ones against the uncertainties of life.
Everyone has a life goal they want to fulfil over a certain time period. In order to achieve these goals, you need to have enough wealth to handle the risk of facing financial instability. The opportunity of substantial wealth gain over a longer duration is offered in ULIPs. Based on what your risk appetite is and what your life goal is, your investments offer you low to high returns. As these returns increase during the duration of your policy, you could enjoy their benefits and fulfil your life goals as well. To get a better idea about which ULIPs you should opt for, you can use the ULIP calculator.
While mutual funds also offer good returns, its duration is short term. This means that if your investments are exposed to market risks, there will not be another chance for you to regain the lost investment which could deplete your returns.
One of the major benefits of ULIPs is that it offers flexibility when it comes to your investments. You can switch between funds to maximise your gains. For example, if you have invested in equity funds but are unsure about the market, you can switch your investment to debt funds. Similarly, you can do the opposite as well. Switching essentially caters to your risk appetite in a ULIP, meaning, you can balance your investments as per your requirements.
This flexibility is not offered in mutual funds. Once you have invested in mutual funds, the investment option remains the same. There is no option of switching in mutual fund and the only option is that you have to surrender your mutual fund in order to get the money back.
These advantages of ULIPs are just a handful. You can get in with your insurance advisor to know more advantages of ULIPs over mutual funds. If you are planning on investing in ULIPs, you can take advantage of the ULIP calculator from any insurer’s website.