What is a ULIP?
A Unit Linked Insurance Plan (ULIP) is an insurance product that combines life cover as well as investment.
Part of the premium paid goes toward allocation, administration and mortality charges, as in regular insurance policies, while the rest of the premium is invested by the insurance company. The allocation of funds toward investment units can be personalized according to the needs of the policyholder and at varying levels of risk.
What are the fund options for ULIPs?
There are four types of ULIP fund options:
1. Equity Fund
These are high risk avenues that allocate funds in shares. The expected returns from this kind of policy are high and are ideal for long term wealth creation.
2. Balanced Fund
Such a fund distributes a part of the premium toward high risk equity units and the rest toward fixed interest units. This has medium risk, because the high risks of the equity units are balanced by the lower risk of the fixed interest units.
These invest the premium in corporate bonds, government securities and other fixed income instruments. As a consequence, these have medium risk.
4.Secure Fund ULIPs
This type of fund carries incredibly low risk. The funds are invested in instruments like cash and bank deposits. Returns from these plans are comparatively low.
Investing in market-linked avenues like ULIPs can offer you the right means to grow your money.
Please note: Insurance is the subject matter of solicitation. For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.
Have you ever wondered why you are asked to pay lesser premium than your friend or family member? To end the confusion, we have prepared a list of factors that affect how life insurance premium is calculated.
Awareness is the first step towards making effective decisions. Appreciating all the nuances of a powerful financial product like a ULIP will help you to decide the perfect plan for you.
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