Everyone aspires to save money. But most of the time, their savings never come up to their future aspirations. Furthermore, saving money goes to the backbench on the face of a person's ever-increasing responsibilities. The best option is taking a ULIP policy.

What is ULIP?

ULIP stands for Unit-Linked Insurance Policy. It lets you create and grow your wealth so as to make use of it for your future aspirations. Here are ten things to know when determining the best ULIP policy:

Decide your objective

What is the purpose of your plan to buy a ULIP policy? ULIP plans offer higher returns for a long-term investment. For instance, the amount you receive in five years would be four times higher if it is there for 15 years. Have a long-term purpose when buying ULIP coverage. It can be to act as a financial cushion for your child’s higher education. If so, you should buy it at the earliest.

ULIP offers utmost flexibility in investment

When you choose ULIP, you get three investment options; equities, debts and a combination of both. If a higher risk does not scare you, you can invest inequities. If you prefer to move with caution, you can go for mutual funds. If you are not an expert in analyzing marketing trends, you can hire a fund manager.

The person will do the job and advise you in accordance with the trend. But see to it that the professional's philosophy of investment matches that of yours.

ULIP does not require a fixed premium

ULIP offers you an option to top-up your investment. It implies that a fixed monthly premium does not bind you. You can add as much money as you want to grow your investment.

A low-performance fund does not have any connection with the life cover you receive

The performance of the fund you choose in the market affects your return on your investment. But it does not affect the life cover you have. You will receive the same amount as the death benefit you agreed upon at the plan's start.

Your ULIP policy is eligible for the triple E exemption

This is something the majority of us does not know. Your ULIP plan is eligible for the triple EEE (Exempt-Exempt-Exempt) exemption. This implies that every phase of your investment here is tax-exempt. This happens because ULIP is perceived as an investment and an insurance product.

Be aware of the various charges you incur

When investing in a ULIP, you incur certain charges:

Premium allocation charge: This is the charge your insurer levies for the marketing and distribution of your fund. This is high during the first year and gets lower as years go by.

Administration charge: This gets deducted from your monthly premium. This is the fee for the management of your investment.

Mortality charge: This fee offers you your life insurance. This varies based on the insured’s rate of mortality.

Fund management charge: This is the fee towards managing your investment. This may vary from 0.5 to 2%.

Don't focus too much on saving tax

Don’t be carried away by the triple E tax exemption ULIP offers. If you are investing either for your retirement or your child’s higher education, you may end up regretting your choice. Do thorough research before making that final commitment.

Aim for maximum returns

Don't yield to the salesperson's pressure tactics to go for the minimum sum assured. The professional has his own objective for the purpose. Go for a policy that offers maximum returns. This way, you minimize the mortality rate charge.

Go for a plan that allows customization

Learn as much as you can about the ULIP plan you choose. Your insurer should let you customize your plan as per your requirements and your budget.

Your insurer should let you change your strategy

If your strategy of investment changes during your plan tenure, your insurer should provide the switching facility. There may be charges you may have to pay. Inquire about it to your insurer and do accordingly if at all it happens.

Take a ULIP policy. It is the only plan that lets you withdraw a sum during a financial emergency without affecting your original investment.