Why you must not surrender your ULIP Policy

Wealth creation or accumulation is growing your wealth through systematic investments. Generally, this means investing directly in the market. However, there are many financial instruments in the markets that provide safer investment options to investors who want substantial returns on their investments. 

One such option is a ULIP, which comes under the life insurance category While it is generally advised to stay invested in a ULIP for the long-term, there are many who tend to surrender their policy rather quickly. Read on to know more as to why you should stay with your policy till the end rather than surrender it before the policy maturity.

What is a ULIP Policy?

A ULIP is a type of life insurance policy. You as an investor get to enjoy the dual benefits of investment and insurance in a ULIP plan. You get to invest in equity, debt, and balanced funds in this plan. The investment you make is based on your risk appetite and your requirements from the plan. 

The policy also provides life protection cover to the family of the policyholder. If the policyholder were to pass away during the term of the policy, the family would receive financial compensation in the form of a death benefit from the insurer.

Why stay invested in ULIPs?

As an investor, if you are wondering whether to stay invested in ULIPs or not, here are a few reasons why you should:

1. Steady returns

No matter what type of investment options you choose in the market, it does not provide quick returns to anyone and certainly does not returns a large amount. Most investors who invest in the market are there for the long run. They know that the returns they get over a longer period of time will be much greater than those of investors who stay in the market for a short period. By balancing your investments between equity and debt funds with a ULIP, you can ensure that for the duration of your policy, your returns will get accumulated enough to match your expected rate of return.

 2. Security

There are many financial instruments that you can take advantage of when it comes to investments. A mutual fund is another such financial instrument. However, compared to ULIPs, mutual funds mostly invest in the equity markets. Equity markets have a higher risk factor which means that the investments done in these markets are more exposed to market risks. The returns that you could get in the mutual funds could be lower than you could expect. The ULIP benefits on the other hand provide you with the opportunity to invest in both equity funds and debt funds. This helps in balancing investments. Investing in both of these funds ensures that your returns do not get impacted due to the market risk.

3. Transparency

As an investor, you would want to know where your money has been invested. You may not get that kind of transparency when you invest your money in mutual funds. In ULIPs, whether you invest in equity funds or debt funds, you can track your portfolio which gives you an idea of which stocks, securities, and bonds your money is being invested in and the returns that you are getting on your investments.

4. Life cover

In this type of insurance, your loved ones are provided with a life protection cover to cope with life risks in your absence. If you pass away during the term of the policy, your dependents would be at risk financially. However, the life cover provides them with financial compensation. This money will help them manage vital expenses and be prepared for emergencies as well.

These are the reasons why you as an investor should stay invested in your policy. It is always better to discuss with your insurance advisor about the plans, tenure, and other ULIP benefits, such as returns before you make an investment in one. Always keep in mind that ULIP insurance should be looked at as a long-term investment rather than something short-term.