Investing in ULIPs? 5 things to keep in mind before buying

A unit linked insurance plan (ULIP) is a financial product that gives an integrated plan, a combination, of insurance and investment. A portion of premium goes towards insurance coverage while the remaining portion gets invested in mutual funds of policyholder's choice. Before investing in such an instrument, you need to be extra careful so, here we list five things to keep in mind before actually buying.: 

1) ULIPs for long-term goals

One should consider them for fulfilling long-term goals like retirement or a child's education. The reason behind that is because the premium gets invested in mutual funds, which require a longer time horizon provide better returns. 

2) Know your risk appetite

As per one's risk appetite, one should select a mutual fund for investment. Risk-averse policyholders may invest major portion of their investment in debt funds, while aggressive investors can go for equities. 

3) Buy products online

ULIPs are available online, through banks and agents too. However, it is advisable to buy products online because it reduces the cost of commission and introduces investors to multiple product options.  

4) Re-balance allocation closer to maturity

Closer to maturity date, one should dilute one's equity exposure and transfer the accumulated corpus into debt funds. 

5) Compare and choose products wisely

Before buying ULIP plan, one should compare all the products available online. Low cost should not be the only criteria to zero in on a fund. Go through the objectives of the fund carefully.