When faced with an emergency like a critical illness or the demise of an earning member of the family, having proper insurance in place provides essential aid. However, while insurance (whether health, term, vehicle or any other type) is necessary, one has to also manage the creation and improvement of personal wealth. With the ever-persistent inflation, a lack of investment can actually lead to an effective decrease in your wealth. To solve both the issues, i.e., insurance and investment, you can always turn to a Unit Linked Insurance Plan (ULIP).
Described below are the key aspects related to what is ULIP plan and how you can utilise ULIP investment to financially secure yourself.
What is ULIP?
A ULIP plan can be considered a combination of both investment and insurance. In these insurance plans, you pay a premium on a monthly or annual basis. A part of these ULIP premiums is used for life insurance coverage, while the other part goes towards investment. The latter part, i.e., the premium for ULIP investment, is utilised for investing in equities, debt, or hybrid funds (combining the previous two). Such a mixture of investment types leads to excellent returns in a secure way.
It should be noted that ULIP investment, however, is subject to market risks that are to be borne by the policyholder based on their investment portfolio.
Why you should Invest in ULIP?
ULIP insurance plan offers a number of advantages to policyholders compared to simple insurance or investment plans. These benefits are discussed here in detail.
Flexibility
Transparency
Goal-oriented Savings
Flexibility
Flexibility to choose between equity, debt and balanced funds, modify life cover, and change the premium amount
Custom riders for additional protection
Liquidity offered
Transparency
ULIP insurance plan charges for different plans are transparent and easily accessible to users
Policyholders can access updates regarding the value of their investments to monitor their performance regularly
Goal-oriented Savings
ULIP provides a systematic long-term investment option that helps you fulfil key life goals like purchasing a home, funding your children’s education, planning for your retirement, and so on
A ULIP insurance plan generally allows users to determine their tenure, insurance amount, and volatility tolerance, which enables them to make informed decisions regarding their portfolio
ULIP policy plans encourage disciplined investment for maximizing returns at a minimum risk
Being a goal-oriented insurance plan, ULIP has various features like premium waivers and so on
Types of ULIPs in UAE
All ULIP insurance plans are designed to increase the value of your investment along with providing insurance cover to provide financial aid in case of an emergency. While the ULIP policy plans in the UAE are not strictly categorised, they can be classified as per the following factors for practical purposes.
Retirement :
Under this ULIP plan, the policyholder makes payment while in service. The collected investment is then repaid in a lump sum or monthly payments to the policyholder after retirement.
Wealth Creation :
This ULIP investment plan is specifically meant for wealth creation over a long period. It is usually recommended for young adults.
Children Education :
Child insurance ULIP plans are meant to take care of a child's financial requirements in case of the parents’ absence.
Death Benefits with ULIP Policy Plans in UAE
If the ULIP policy selected by an individual has term insurance, the benefits are provided to the family of the policyholder after the demise of the insured individual. However, it should be noted that the provision of benefits can differ as per the plan selected.
For instance, some ULIP insurance plans provide beneficiaries with an amount equal to fund value plus the sum assured. On the other hand, some plans may do otherwise in case of demise. Ultimately, as these aspects vary by plan, one should contact the provider and seek clarity regarding the same before initiating their ULIP policy plan.
Who Should Invest in ULIP in UAE?
It is usually considered that ULIP investment is best suited for individuals with long-term investment goals requiring insurance coverage. While beginning early with such plans is always beneficial, one can always make the start at any age provided they have not crossed the age limit for such plans.
As often said, proper investment can always prove helpful for fulfilling various financial goals and obligations. Anyone with a regular income and looking to secure their family’s future should have ULIP investment in the UAE.
You can select the type of fund for your ULIP investment based on your risk appetite and return goals. You can either go for more returns (and risk) through equity funds, stay conservative through debt funds, or have a balanced approach through hybrid funds.
Fund switch :
You can easily switch from one fund type to another in a ULIP policy. This allows you to modify and easily safeguard your investments from market fluctuations.
Partial withdrawal:
A key feature of the ULIP policy is the option to withdraw money after the expiry of the lock-in period. The number of withdrawals and the cap on the amount withdrawn, however, depends on your chosen plan.
Add-ons:
With changes in your financial goals, you may want to modify your investment portfolio. ULIP investment allows users to add top-up to their initial investment in the plan to fulfil the varying requirements.
Convenient premium payment frequency:
With a ULIP insurance plan, you have the option of paying premiums at your convenience. With payment choices in the form of monthly, half-yearly, annually, or as a single payment, it is a flexible financial instrument.
Best ULIP Insurance Plans in UAE to Invest in 2022
One should take into consideration that not all plans in the UAE provide ULIP policy features under that name. Similarly, several plans may not provide all the benefits associated with ULIP plans in the UAE. However, these plans still make for an excellent choice regarding the goals of investment and insurance in the UAE.
With that in mind, here are some of the best ULIP investment plans in the UAE.
RAKBANK Elite Unit Linked Savings and Investment Plans
ADCB Systematic Investment Plans
ADIB Investment Solutions
Oman Insurance Unit Linked Plans (Smart Invest, Oman Advantage, and Elite Life)
How to Choose the Best ULIP Policy in the UAE?
With numerous ULIP policy options available in the UAE, there is no specific plan that can be considered the best. The perfect plan for you depends considerably on your financial requirements and future planning. In that light, you can follow the given steps while choosing the best ULIP policy in the UAE:
Determine Your Goals
Before deciding on any ULIP investment plan, identify your objective for making the specific investment and what is expected from the investment. Determine your key financial goals like children’s education, insurance, retirement, etc., as these will impact your investment in ULIP.
Next, you should analyse the degree of risk you can manage at the existing stage in your life as per your earning and paying capability, current savings, and potential financial goals. If you can afford more risks for better returns, you can go with a ULIP insurance plan in the UAE that provides the opportunity to invest in equities for better returns.
Verify your Investment Timeline
Based on the investment timeline, you can choose an appropriate plan. For instance, you can select a ULIP investment plan for the long term if you are young. However, it should be noted that ULIP Policy plans are best suited for investors with a long-term investment horizon.
Compare ULIP Plans
It is essential to compare the ULIP policy plans offered by the different insurance and investment companies in the UAE. This would help you evaluate the return on investment, applicable premium, etc., and make the best choice as per that information.
Benefits of ULIP Policy Plans in the UAE
Significant returns on investment
Freedom to choose Life Cover, Investment Type, and Premium amount
Less hassle due to insurance and investment being covered in a single place
ULIP Charges in the UAE
There are several fees and charges associated with ULIP policy plans in the UAE. Besides the fee applicable at the time of purchase, several ULIP charges can be levied later in the form of fund management charges for managing and investing your funds, partial withdrawal charges, and so on. One should verify all the charges with the policy provider before making a ULIP investment, as these can amount to a significant amount when accumulated over a prolonged time.
Advantages of ULIP over Mutual Funds
ULIP has generally lower fund management charges than mutual funds
A ULIP insurance plan allows access to insurance besides investment at more affordable rates compared to securing both individually
While mutual funds allow investment in equities, ULIP investment plans have the option of investing in debts, hybrid funds, and so forth
Things to Consider Before Investing in a ULIP Insurance Plan in the UAE
Here are some key aspects to consider before selecting the best ULIP insurance plan as per your requirements.
Select a ULIP investment plan that suits your long-term personal investment goals and provides maximum returns.
Evaluate insurance coverage required for getting the maximum benefit.
Compare the key features and benefits of various ULIP policy plans from different providers.
Evaluate the performance history of investments in the ULIP plan of your choice and compare it with the benchmark indices.
It is recommended to select a ULIP insurance plan which offers flexible investment and tenure options.
Investors with a higher risk appetite can select equity plans, while others can consider debt or hybrid funds.
One should thoroughly evaluate the different ULIP charges to avoid paying fees they were unaware of in the beginning.
Check the claim settlement ratio of the provider from various sources.
To conclude, ULIP is a systematic investment-cum-insurance plan suitable for investors who are looking to fulfil long-term financial goals and improve their chances of earning higher returns. With several options related to ULIP insurance plan from the top providers available in the UAE, they are suitable for different age and salary groups.
You can visit our website and explore several insurance plans regarding health, term life, vehicle, travel, and so on. In just one place, you will be able to explore some of the best ULIP policy plans in the UAE and get the one out of your choices in just a few clicks.
Before you leave and check the best ULIP investment plans in UAE, you can quickly go through the following information to know more about some key details related to ULIP insurance plans.
Net Asset Value (NAV) is a metric related to the price at which ULIP units in a fund are purchased. It is measured as the asset value per unit minus liabilities value per unit of an investment fund.
Can I make withdrawals from my ULIP policies in the UAE?
Yes, you can make part withdrawals from your ULIP policy after completion of the specified term as provided by your ULIP insurance plan provider. You can also go for early withdrawal in some cases, although a fee might be levied for that.
Can an investor surrender their ULIP policy in the UAE?
Yes, an investor can surrender their ULIP policy in the UAE after paying the charge applicable on such surrender.
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