Investors looking to invest in secure financial instruments must consider buying ULIPs. These unique products offer the security of a life insurance product and a chance for the policyholder to earn returns based on fund performance. Depending on one’s risk appetite, there are a variety of ULIP policies that one can choose from. Despite these ULIP benefits, a few myths about ULIPs still scare investors. These myths exist due to outdated perceptions of ULIPs and misinformation. This article aims to break down these myths and reduce the inaccuracies related to ULIPs.

1. ULIPs are not worth the high premiums 

As compared to other life insurance policy types, ULIPs have higher premiums. Due to this fact, many people shy away from taking the first step. However, one must also look at the various benefits they get by paying slightly higher charges. They no longer have to manage two separate products for insurance and investment. Both aspects are being dealt with under one product itself. Plus, they benefit from choosing between equity funds and debt funds. And if they are uncomfortable with their initial choice, they can always choose the fund-switching option.

2. Fund switching in ULIPs always incurs charges

Many people think that switching funds will require higher charges. This also breeds the misconception that any potential benefits obtained by changing funds might be nullified due to the high costs. However, in today’s world, this is merely a myth.

Today, you can switch your ULIP funds as often as you want in a year without incurring any charges. Whether you are transferring funds from equity to debt or vice versa, you do not have to pay any additional costs. Leading insurers offer such exciting ULIP benefits.

3. ULIPs are suitable only for experienced investors

Since ULIPs are considered a product under the life insurance category, there is a misconstrued belief that only those with families should invest in such a plan. However, as time and again analyses have shown, young, single individuals can benefit immensely from life insurance. When you buy a ULIP at a young age, when you may not have much experience with investment, the premiums are pretty low since young people are considered relatively healthy. This makes it easier for you to afford ULIPs. Furthermore, when you invest in the equity market via ULIPS, you do so via a reputed insurance company. Fund managers from the company would advise you and ensure you enjoy the maximum returns from your ULIP plans. As a beginner investor, this can be immensely beneficial, financially and educationally.

4. ULIPs are not suitable for insurance coverage 

ULIPs are so widely associated with investment jargon that many people perceive them as not good life insurance products. As a deep dive into any ULIP policy wording shows, this is untrue. ULIPs offer as substantial life coverage as any other life policy. Adding accumulated returns increases the chance of the beneficiaries receiving a higher sum assured amount.

A ULIP also offers the usual insurance riders, such as the critical illness rider and the premium rider waiver. These can increase your financial protection to a new level.

5. Market performance affects the life insurance cover 

Another myth that plagues ULIPs seriously is that people assume that the funds’ market performance affects life insurance coverage. This myth does not hold at all. How the funds perform does not have any effect whatsoever on the life insurance corpus. The insurance and investment portions are separate aspects of your policy, even if they come under the same contract.

In some policies, the beneficiaries may receive the sum assured amount or the fund value, whichever is higher, on the policyholder’s passing. So, better returns from the ULIP plans might mean a higher sum assured amount. However, negative performance does not imply a reduction in the chosen sum assured amount.

These myths can hamper your chances of earning good returns and adding a valuable product to your financial portfolio. That is why it is better to be well-informed. We hope this article has helped you in the process. Do consult a financial strategist before making any decisions.