Life goals are the things that you want to achieve or accomplish in your life. They can be related to your career, finances, health, personal development, relationships, education, spirituality, or any other aspect of your life that matters to you.
But how do you plan for your life goals? How do you ensure you have enough resources, time, and motivation to pursue them? And how do you balance your present needs with your future aspirations?
One solution is to invest in a ULIP plan. It stands for Unit Linked Insurance Plan. It is a financial product that combines life insurance and investment in one plan. ULIPs offer you the dual benefits of protection and wealth creation.
Here, we will explain how ULIPs work and how you can use a single ULIP plan to meet all your life goals.
What is a ULIP plan and how Does it Work?
A ULIP plan is a type of life insurance policy that allows you to invest a part of your premium in various funds of your choice. These funds can be equity, debt, or balanced, depending on your return expectations.
The premium you pay for a ULIP plan is divided into two parts. One part goes towards providing you with a life cover, which is the sum assured your nominee will get in case of your unfortunate demise. The other part goes towards buying units of the fund that you have selected.
The value of your ULIP plan depends on the performance of the fund you have invested in. The fund value is determined by multiplying the number of units that you hold with the net asset value (NAV) of the fund. The NAV is the market value of one unit of the fund.
You can monitor the performance of your ULIP plan online and switch between different funds as per your changing needs and goals. You can also make partial withdrawals from your ULIP plan after a certain lock-in period, subject to some charges and conditions.
Now that you know what is ULIP plan, let’s move to the main point.
How to use a single ULIP plan to meet all your life goals?
You may have multiple life goals that require different amounts of money, time, and effort. For example, you may want to buy a house, travel the world, start a business, retire comfortably, etc. But how can you use a single ULIP plan to meet all these goals?
The answer is to prioritise your goals and allocate your funds accordingly. Here are some steps that you can follow to do this:
- Step 1: List all your life goals and categorise them into short-term, medium-term, and long-term goals. Short-term ambitions are the ones you wish to achieve within the next five years, medium-term goals are those that you want to accomplish within the next five to 10 years, and long-term goals are those that you want to achieve after 10 years or more.
- Step 2: Estimate the money you will need to achieve each goal and the time horizon for each goal. You can choose online calculators to do this. Factor in the inflation and the expected rate of return on your investments.
- Step 3: Choose a ULIP plan that suits your risk profile, budget, and goals. You can compare different ULIP plans online or offline and select the one that offers you the best combination of features, charges, and returns.
- Step 4: Decide how much premium you want to pay for your ULIP plan and how often you want to pay it. You have the flexibility to pay your premium monthly, quarterly, half-yearly, or annually, revolving around your financial situation and convenience. Alternatively, if you have a lump sum amount, a single premium payment is an option.
- Step 5: Distribute your premium across various funds based on your objectives and risk tolerance. Consider equity funds for long-term goals, debt funds for short-term goals, and balanced funds for mid-term goals. Spreading your portfolio by investing in a combination of funds can lower risk and enhance returns.
- Step 6: Review your ULIP plan periodically and make changes if required. You can switch between different funds as per the market conditions and your changing goals. You can also increase or decrease your life cover, premium amount, and policy term as per your changing needs. However, you should avoid frequent switches or withdrawals as they may affect your returns and tax benefits.
By understanding how ULIPs work and following a systematic approach, you can align your financial resources with your short-term, medium-term, and long-term objectives. Prioritising your goals, estimating the required funds, and selecting the right ULIP plan based on your risk tolerance are vital steps.
Additionally, you have the flexibility to tailor your premium payments to your convenience, whether it’s monthly, quarterly, half-yearly, or annually. You can also make a single premium payment with a lump sum available.