A ULIP is basically a life insurance policy, which has many additional benefits in its basket. It offers more than just the life insurance coverage, in terms of investments, flexibility and other customizations. Over, the last few years, the boom in capital market has forced the insurance companies to launch policies that offer stock market-driven returns along with the basic function.
In a Unit Link Insurance Policy, the returns are not guaranteed and depend on the Net Asset Value of the units which varies according to the market conditions. But , in case of causality, the policy holder gets the ‘assured sum’. ULIPs are proven as the one stop solution for the benefits of both the Insurance Cover and a planned investment of portfolio in the market, like a mutual fund.
Here are a few key features and flexibilities of the ULIP-schemes, which makes it beneficial for the consumers:
- One stop solution
Unit Linked Insurance Policy provides a multiple benefits of Life Protection, long term saving program, transparent investment in stock market as unit fund, liquidity in case of need of money and also the tax planning all at one platform.
For layman who can’t bear the burden of maintaining various mutual funds, insurance policies and corporate bonds, a ULIP-fund is an ideal option.
- Investments and Savings
ULIPs are generally a long term program, with time duration of around 10 years. It helps in accumulating asset for a salaried person. He also gets the option of deciding on how much risk he wants to take by choosing an appropriate portfolio and thus getting the returns accordingly. For a conservative consumer, debt market would be a good option and for a person with risk appetite, equity market can be on the portfolio. Similarly, people can choose from many balanced investments having the mix of both equity and bonds.
- Flexibility of Cover Continuance Option
As insurance policy is a long term contract, there can be situations when the policy holder is not able to pay his/her premiums. There is a flexibility of continuation of the policy even at these times. One can resume the payment afterwards. There are also options like premium holidays highlighted by many ULIP-policies serving the same purpose. Policyholder is exempted from paying premiums during this period.
- Transparency
In the conventional policies which promise returns along with insurance coverage, the investment of the premium money remains undisclosed. But in a Unit Link type of Insurance, the policy holder chooses the portfolio where he wants his money to be invested. Some policies also flaunt a la carte options where consumers can handpick the investments options from the given lot.
- Extra Protection
Many policies provide the option of riders. These riders are added to the basic scheme at a nominal charge and can add extra insurance cover in case of disability or death due to accidents.
- Liquidity
ULIP’s major advantage lies in its flexibility for partial and immature withdrawals in times of financial crisis. It makes it a very practical alternative for long term saving plans. These ‘Units’ can also be redeemed after a certain period of time.
- Tax Planning
Section 80C gives tax benefit on premium payment up to 20% of the sum assured. There are many other tax-planning customizations in a single ULIP plan according to your financial scenario.
- Higher Return Potential driven by Capital Market
As the unit-linked funds invest policyholder money in equity markets also, the possibility of the returns is high though the risk of undervaluation also exists.
- Switch and Top-up and other features
SWITCH facility enables the policyholder to direct his allocated money for investment from equity to debt market or vice versa depending on the market conditions.
Similarly in case of a surplus income, Top-up facility gives the choice of investing more money in a unit fund apart from the regular premiums.
No matter what are your financial scenarios or your personal needs; there is always one ULIP scheme that exactly suits your case. This surely does make it an option to be considered for every individual.
We would like to hear from you in case of further queries or doubts. Post a comment to interact with us.
July 18, 2011 at 3:45 pm
Is something like the combination of health and life insurance policy? any combined benefit from those two policies?
July 21, 2011 at 6:05 pm
will the plan be flexible for all sectors of the people(like both rich and poor peopls)?
July 21, 2011 at 6:19 pm
What are disadvantages of this plan from the normal insurance plan?
July 21, 2011 at 6:22 pm
Good plan, the best insurance plan for almost everyone