Saturday, June 22, 2024

How Much Should You Invest in ULIP to Achieve Your Goal?

Invest in ULIP


Over the past few years, ULIP has gained immense popularity among insurance buyers in India. Experts suggest that they will continue to outsell other insurance policies in the future. Generally, there are two types of investors who purchase ULIPs. First, experienced investors, i.e., those who know exactly how much they want to invest in ULIPs. They choose the suitable funds and allocate appropriate portions of funds. Second, first-time insurance buyers and amateur investors. These are the people who have no clue how much to invest in ULIP to achieve their goals.

Whether you are an experienced or amateur investor, your purpose of investing in ULIP plays a vital role in deciding how much you should invest in ULIP. So, let us look at a couple of goals and understand how much ULIP investment you need to accomplish them.

Goal – Building a corpus for your child’s future

Education, medical treatments and everything else is becoming expensive with every passing day. Children are becoming more ambitious and you don’t want to feel helpless when they grow up and ask you for moving out or study abroad.

In such cases, it is best that you prepare for such events right away with ULIPs. Accumulating wealth for your child’s future is going to be a a long-term goal. Assuming you have started investing as soon as the child is born, you would have about 10-15 years or more to build a decent corpus. Depending on when you start investing and how much corpus you wish to build, you must decide the investment amount.

For example, if you have a longer horizon of 10-15 years, you can invest in equity funds as it has excellent returns potential in the long run. As you get closer to the goal, you may move your funds from equity to debt to get a more stable return.

To know exactly how much you should invest in this goal, you can follow the given steps:

Calculate the cost of education today for most expensive study courses. This can be a reference point where you start

Calculate the future cost, for example, how much will these course cost in 10-15 years. Consider the education inflation while computing this amount.

Compare different ULIPs offered by different insurance companies. The best way to do so is by using an ULIP calculator to know the expected returns on your investment. This will help you know the amount you must invest every month in ULIP to accumulate the desired corpus.

Goal – Building a five crore retirement corpus

Accumulating five crores is a big goal. It may even sound too ambitious and unachievable. But, you can achieve this goal with ULIP investment if you plan it right and start investing early.

For this goal, the time limit depends on how early you start. It is advisable to start as soon as possible to have sufficient time to build a larger corpus. If you have about 30 years to achieve the goal, you can invest your savings in equity funds and wait until the goal is achieved.

To know exactly how much to invest, use the ULIP calculator to know the premium amount you must pay every month or year. Additionally, you can consider increasing your investments in ULIP through the top-up facility. This is helpful when you get a salary appraisal or an annual bonus; you can use the amount to invest in ULIP and get a step closer to achieving your long-term goal.

Final Word

ULIP is a great investment for achieving long term goals but there has to go a lot of thought before choosing a plan. You should not start investing money without discussing, thinking, and understanding your requirements.

Be it child’s future, retirement or just simply wealth building, every goal can be achieved if you choose an investment profile that complements your goals.

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