Out of the numerous investment instruments available in the market, the Unit-Linked Insurance Plan (ULIP) has emerged as one of the most promising alternatives. If you are wondering what is ULIP plan, then read on. 

ULIP is a type of insurance policy that secures your life and provides the facility of investment.Part of your premium is invested in equity, debt, or a mixture of both, to help you earn substantial returns in the long run. As there are no other insurance plans available in the market that offers such benefits, ULIP is one of the most popular financial instruments among many investors.

You can earn lucrative returns from a ULIP plan. However, to achieve this objective, you need to monitor the performance of the market and the funds where you have invested your money. Like any other investor, even your primary motive would be to earn attractive returns on investment. ULIPs can help you make good returns if you follow the tips outlined below:

1. Select and allocate assets wisely

ULIP offers you the flexibility to select the type of fund as per your preference and risk appetite. It is vital to choose the right class of funds to avail of better ULIP plans returns. One of the best advantages of investing in ULIP is that it allows you to move your investment from one fund to another. Besides this, it enables you to control the risk that can arise due to the capital market’s uncertainty. A part of your premium amount is invested in equity or debt funds. Based on your risk-taking capability, you can opt to invest in high-risk equity funds or less-risky debt funds. Investing in an equity fund is risky, but with higher risks, you have the opportunity of earning greater returns. Therefore, it is important to pick the correct combination of funds that can help you to meet your financial aspirations.

2. Reap the benefits of compounding 

In compounding, the amount earned via interest or investment is reinvested to grow your funds exponentially. However, it is only possible if you invest with a long-term horizon of more than ten years. ULIPs are structured for long-term investments. So, if you plan to buy a ULIP, it is advisable to stay invested for approximately 15 years to earn highreturns.The power of compounding helps you to earn interest on the interest that you alreadyreapedon your principal investment. Therefore, you must invest with a long-term perspective and earn significant ULIP returns.

3. Invest according to your financial aspirations and economic condition 

Investment should always be made keeping your future financial goals in mind. This rule applies while investing your hard-earned money in ULIP as well. Therefore, jot down your monetary objectives before investing in a ULIP. Some people invest with an ambition to buy a house in the future, while others invest to fund their children’s education. Once you know your investment objective, it becomes crucial to ascertain the amount you want to invest, based on your financial situation.

Besides this, ULIP lets you control your investment. If you think that the equity market is going through a rough phase, you can switch from equity to debt fund to avert the risk arising due to the market’s uncertainty. Similarly, if you feel that the market will peak, you can shift from debt to equity funds.

While investing in a ULIP, do not forget that this policy’s primary purpose is to secure your life. So, do not neglect the importance of life insurance. Ensure that you maintain the ideal balance between insurance and investment component based on your financial goals.