What are Unit Linked Insurance Plans?
A Unit Linked Insurance Plan is an insurance plan that offers you a life cover and is also an investment.
How does a ULIP work?
In a Unit Linked Insurance Plan, part of the premium that you pay goes towards mortality charges, similar to regular insurance policies. Here’s how it is different. The remainder of the premium is invested for you by the insurance company.
You can choose the investment units and the distribution of funds to match your needs. Don’t fancy high-risk investments? Take a deep breath. You can vary the levels of risk for your investments.
Demystifying Unit Linked Insurance Plans
We’ll banish some popular myths about Unit Linked Insurance Plans for you.
Unit Linked Insurance Plans are costly in comparison to other investment products.
Unit Linked Insurance Plans were costly some years ago because of the high premium and fund management charges. In recent years, ULIPs have seen several changes with respect to the charges and fund management fees. and there has been a decrease in costs. You can get Unit Linked Insurance Plans that are competitively priced.
ULIPs are invested only in equity markets. They are risky.
Don’t be so hasty to dismiss Unit Linked Insurance Plans. With a ULIP you can decide the level of risk for your investments. There are different types of funds that you can choose from. You can also change funds to suit your evolving lifestyle.
Unit Linked Insurance Plans offer extraordinary returns.
Remember, a ULIP is not only an investment product. A ULIP Plans gives you an insurance as well as investment options. A part of the premium is allocated to the life cover and other fees. The remaining premium amount is invested.
Life cover decreases with market volatility.
Many investors have the wrong idea that, because ULIPs are linked to the equity market, the sum assured amount would decrease if the market dips. Not true. Despite market volatility, your life cover will remain unaffected. In case of the policyholder’s demise, a ULIP pays the entire life cover or the fund value, whichever is higher.