ULIP is presenting to its clients various fund choices such as the equity, the money-market, guilt, balanced, debt and other fund options. In relation to these types of fund, the clients’ money in the form of financial investment is kept for a particular time frame. Hence, it is of utmost importance for the client to be truly careful and intelligent in choosing only the most effective fund in the first place.
How does ULIP fund work as an option?
ULIP fund works in such a way that is easy to be understood by its would-be clients. This is a very essential matter because the client would only invest in this type of fund unless they know the detailed process of how it works or operates. In ULIP fund, the client which is usually called a policyholder, will be offered to choose the amount he wishes to invest and also the premium that suits his budget. There is what we call a mortality risk in an ULIP fund and the charge of this is usually deducted from the given sum chosen by the policyholder. After settling with the sum assured by the client, he then will choose a specific term of payment for his premiums. The next step is the choosing of the suited fund where he wishes to invest the premium he selected. The usual types of fund offered by the companies connected with ULIP include the following: equity, balance, debt, money market and others. It must be noted by the client that there is also a processing fee which is called management or administrative fee in the investment process. This will be deducted from the actual premium of the client. Then, the remaining amount which is the net premium will be the money that will be invested in the chosen type of fund by the client or investor.
Why should policyholders choose this option of fund?
Various reasons are present in choosing this type of fund. We know very well that there are two common kinds of investments, the debt fund and the equity fund. Both differ in the return of investment and the risk involved. Debt fund is less risky and the interest return is quite low. Equity fund where ULIP can be categorized may have high risks involved yet the possibility of high return of investment is present. The time frame is also to be considered here. Experts are one in saying that equity fund is in fact high generating and profitable in view of investment if the time frame is longer.
How to choose the most suitable or best fund for you?
A lot of practical consideration is involved in choosing the best and most suitable fund for you. Experts believe that the usual instinct and tendency of every would-be policy holders are their risk factor and emotional appetite. Risk and appetite themselves are the driving force for every client in settling with the best fund that suits their needs. There are aspects that the client or policy holder should gauge or measure his capacity to take risk in choosing his type of investment. This may include primarily his personal status, whether he is a single person, a newly married man, a person with a family, if you have certain dependent family members, the number of years remaining for you to work, number of years before you retire and other related reasons. Take into account that not every fund is tailored fit for every would-be policyholder. Finally, everything in view of these fund investments is anchored with the status and stability of the economy.
Below is the table specifying the status, risk profile, people involved in view of risk and loss and asset allocation in investing at equity fund like the ULIP fund:
| Status | Risk profile | Who stands to lose if there is a loss | Asset allocation |
| 25yrs old – Single | They usually can take on high risk | Only the person himself | 85% equities 5% bonds 10% liquid assets |
| 30 years old – Married without kids | They can still take on high risks since they are still young | The person and his partner | 80% equities 10% debt 10% liquid assets |
| 33years old – Married and with kids | Balance of taking in risks is a must | The person with his partner and childer | 60% equities 20% debt 20% liquid assets |
| 58years old – they have kids who are not dependent | People who cannot take risks | The person and his partner, yet this is not okay already because you are retiring soon | 30% equities 20% debt 50% liquid assets |
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In conclusion, as much as able, we should not be afraid in investing to equity fund such as the one mentioned in this article, that of ULIP. Though there is a high risk in the possibility of decreasing the capital investment, it is comforting to note that the chances of earning more are there since it is proven by experts. In the long run, you will be enjoying the fruits of your hard earned labor and money. While the iron is hot then strike hard to be ready for the rainy days…
