Before making the final decision regarding an investment plan, one must do a great amount of research. One should look at the various aspects of the plan to get a comprehensive understanding of the topic. And if the investment plan is also a life insurance policy, such as a ULIP, then doing this research becomes even more important. ULIP premiums are used to invest in the market as well as to create and sustain the life cover of the policyholder. Adequate research ensures you to a certain extent that both these aspects of the policy serve their aims. To help you in the process, we take a look at the important factors one must verify before signing the ULIP proposal document.

Check these before you sign the ULIP proposal

Life coverage limitations 

When you buy a life insurance policy, you do so with the intention of securing the future of your family. Therefore, you must check the conditions under which your chosen beneficiaries will receive the sum assured amount. For instance, some policies do not cover deaths that occur within the first 2-3 years of the policy. Or some situations in which the policyholder passes away may not be covered.

You should check if the policy has comprehensive coverage. Its wordings should ensure the ultimate protection for your loved ones at the earliest.

ULIP charges 

As compensation for the varied benefits they offer, ULIP insurers levy multiple charges on their plans. Some of these charges are policy administration charges, fund management charges, surrender charges, and so on. These may differ according to plans and insurers. Hence, you must be well aware of the kinds of charges and penalties that your ULIP plan includes. A lack of information about this aspect can cause issues during the tenure of the plan.

Policy lapse section

Even though you may try your best to maintain your ULIP policy the right way, it may get lapsed due to one reason or another. Does that mean you will lose all the returns from the ULIP plans accumulated until now? There is a high chance that the answer is negative. Regardless, it is best to clear these matters before signing the policy proposal. You should read the policy wordings on this matter as well as connect with your insurer and get your doubts cleared.

Benefit illustration 

Understanding the ULIP benefit illustration is very important before buying a ULIP. This illustration describes the way your premium will be used, where your money will be invested, the ULIP charges levied, the returns expected, and so on. You also get to see the maturity value and the surrender value at different points of the tenure. The IRDAI has made it mandatory for insurers to showcase this illustration to ULIP buyers. Hence, you should also make it a point to check the illustration, review the information provided, and check if it meets your goals.

The kinds of funds on offer 

There are different types of ULIPs in the market, with each catering to varying risk profiles. Thus, you should thoroughly check if the fund options you want are available in your ULIP policy.

What to look for in the insurer before signing up 

Now you may know what to look for in the ULIP wordings, but that may not be enough. We list down some factors that you should look for in the insurer as well.

• A credible reputation – An insurer with a credible repute provides you with the assurance that your money is in good hands. Check the reviews, testimonials, and so on before proceeding with an insurer.

• Excellent customer service – A committed customer service staff is important to ensure that your complaints and queries are addressed with due consideration.

• High claim settlement ratio – The claim settlement ratio is a good indicator of how dedicated the insurance company is to handling policyholders’ claims. That is why you should ensure that you choose an insurer that has a high claim settlement ratio.

• Good past record – One must remember that past records do not always indicate future returns from ULIP plans. However, it does show how dedicated the company’s fund managers are to investing the policyholder’s money the right way.

Even though all aspects of the policy may be correct, it may still need some tweaking to suit your needs. That is why you should also get the advice of a financial expert.