There is nothing healthier than saving a few rupees of your investment; and with our government and other financial institutions like banks offering various schemes and plans to make this into a reality there is no reason why we should not opt for it. If you are a monthly employer and you need to make a saving, then starting off with this financial scheme will be a good option.
What is ULIP?
ULIP is a Unit Linked Insurance Plan. We know that most insurance plans protect only our lives in cases of any accident or death.
ULIP is a kind of life insurance policy where in you will gain return upon investment of a premium amount in the stock market once it reaches maturity.
You will have to pay a premium amount in the funds which you have chosen. There will be incurring charges for fund allocation, managing funds, policy administration. The remaining fund is split into units, which is invested in stock market or type of fund as you wish.
Your Life is also covered as per the insurance policy and as per the Sum Insured in the policy document. Additionally you will be getting a feel of markets on the units as the market moves.
Units can be split and allocated to equity, debt or other instruments and per the risk apetite of the insured. You are allowed to switch over to another financial instruments as and when you need. There will be limit for number of free switchs per year, remaining will be charged. But you have the freedom to get in and out of the markets and allocate your funds to safer instruments.
Recommended Read : Are there any risk free ULIP?
Benefits of ULIP
- You will earn market linked returns with the premium amount invested in the market linked funds which are then later invested in debts and equity in varying proportions.
- ULIP insure your life as well as your savings at market linked returns. The more money you invest, the higher return you earn thereby encouraging a habit of savings and investment in you for longer periods.
- The investment made in ULIP is risky considering the capital market but the risk should be borne by the policy holder. Hence, it is up to you to make a wise decision whether to choose ULIP or any other scheme.
- ULIP offers policy holders or investors an option to switch their capital between funds depending on your needs, which is also a risky step undertaken by the investors and they will have to keep a close watch on their investment at all times
- ULIP is ideal for those investors who want to invest for a longer period of time and not a short span.
- ULIP also gives you the flexibility to withdraw the partial amount from the policy, but you will be subject to certain charges and conditions.
- You will have to pay the already decided premium amount either monthly, annually, semi-annually depending on the tenure selected.
Drawbacks of ULIP
- You will have to invest the entire premium amount as lump sum at the opening of the policy period.
- You will have to bear certain charges deducted from your policy like administration charges, switch charges, fund management charges, surrender charges, morality charges, partial withdrawal charges etc.
Having known in detail about ULIP, you can weigh the pros and cons and make a decision as to choose this life insurance scheme as an investment plan or pot for anything else.
A Unit Linked Insurance Plan (ULIP) is a product offered by insurance companies that, unlike a pure insurance policy, gives investors both insurance and investment under a single integrated plan. This article is a help indeed. It describes the various benefits and drawbacks of the same and can be easily referred.
I am not clear about its working mechanism. We invest a lump sum amount in the beginning (Lets say Rs.50000). Then what happens? Who will invest in stock market, the company through whom i took ULIP? If yes, then will the instruments be chosen as per my recommendations? And will this happen during the policy period? Sorry but an example would have helped to explain this better!
Unit Linked Insurance plans make sure you have life insurance, but they also make sure you have some savings too. You have to pay a premium on the plan and you have to pay administrative fees, but if you withdraw any of the savings your plan makes before the tenure is up you must pay penalties for that withdrawal. The penalty for withdrawal basically puts you off withdrawing too much whenever you feel like it.
This is a great way to make sure your family has more money to cover any funeral expenses in the awful event of your death.
ULIP is the abbreviation of Unit Linked Insurance Plan. Readers will come to know about ULIP and as to how this is a hot topic. It explains ULIP and also its benefits along with some of the drawbacks. You must be careful regarding this insurance policy and this is illustrated above.