All the decisions that have a long-term impact need thorough thinking so you could minimize the possibilities of mistakes. It is the same in the case of a Unit Linked Insurance Plan (ULIP). It is an ideal financial instrument for meeting your life goals as well as to provide protection against life risks. It is, however, essential to gauge your needs for life insurance and review these needs annually or when there’s a life-changing event. This allows you to plan for your changing financial requirements.

Following are the top five things you need to keep in mind while buying a new ULIP plan. It will help you to gain maximum benefits from your ULIP plan.

1. Have a clear view of your long-term needs

Charles Schultz, in Charlie Brown’s Little Book of Wisdom, said: “Learn from yesterday, live for today, look for tomorrow”. The quote gives us a message for financial planning for individuals. You must not sacrifice your today for tomorrow, but always keep an eye on the future. If the planning does not start today, once you reach tomorrow, you won’t be prepared for it. It is necessary to identify your short-term and long-term needs separately. Also, view the liabilities that you are carrying from the past. You must understand that the financial instruments for both of these needs are different as well.

2. Evaluate your insurance needs from time to time

A ULIP investment provides a life coverage for meeting your long-term financial goals. You might have bought a policy to achieve certain financial goals like your child’s education and marriage or your retirement. You must review them periodically as your aspirations as well as needs might have significantly changed over time. How much you can earn has a direct impact on your lifestyle. Therefore, there is a need for the quantum of life cover to ensure that your family doesn’t have to compromise their standard of living in case of an unfortunate event like death.

3. Maintain a long-term view

The special design of ULIP policies gives maximum benefits over the long-term. The market-driven ULIP Policies provide the dual benefits of saving and protection like the ULIPs and provide maximum benefit over the long term. It is beneficial to read and understand the advantages you will have if the policy is held throughout its tenure, i.e. until its maturity.

Power of compounding simple means that you earn interest on your interest. You earn a return in your first investment and then in the second year you earn a return on this return and so on. Thus, if you start early, you will get the maximum benefit through the power of compounding. Compounding is a great way to maximize the returns on investment.

4. Follow financial discipline

When it comes to investing, you can never stop enforcing the value of financial discipline. If you invest regularly, then it will help you in attaining your life goals with ease. Paying premiums regularly will keep your policy active. If any deadline for premium payment is missed, it might result in the lapse of the policy. Your risk coverage may also stop, or you might get a lower insurance coverage that results in financial loss and increased financial risk for yourself and your family.

5. Review your tax implications periodically

ULIP Policy is a great tax-saving tool. Under section 80C, you are eligible for a tax deduction up to Rs. 1.5 lakhs, on the premium paid. Therefore, it is important to plan a periodic review for your tax liabilities at the beginning of the year.

If you keep all these points in mind, you can derive maximum ULIP benefits. It is very important to review your policy periodically, understand its features as well as tax benefits and keep a long-term view. This helps in attaining your life goals very easily.