A unit linked insurance policy is a unique financial instrument which provides both the safety of life coverage like an insurance plan and the return on investments like a Mutual Fund. It is considered as a unique balanced fund with a long term investment objective aiming to deliver reasonable returns.
Generally ULIPs are mistaken as the profit-life coverage combo insurance plans by laymen. These conventional plans provide lower returns and don’t disclose where the money is being invested, while in ULIP-scheme, everything is transparent and we have to even choose from the options available about where our money should be invested. The only drawback with the Unit Linked plan is that the risk is borne by the policy holders so there are no guaranteed returns. But by choosing a good ULIP program one can strike the optimum chord of good returns at lower risks.
For passive investors who don’t have the motivation to religiously follow the stock market, these ULIP-programs provide a perfect investment option to get the benefits of rising stock markets along with the safety cover. There are many Unit Linked type of insurance programs in the market offered by various companies and identifying a right plan plays a crucial role in the whole process. Here are few tips and suggestions one should keep in mind and some basic knowledge that is a must-know for purchasing a Unit Linked policy. These plans are dynamic, very flexible; they have a high degree of customization and thus full awareness is the prerequisite to get the most out of it.
Your needs and requirements are important
Not one ULIP scheme is best for every individual out there. A lot depends on the person’s needs, requirement and risk taking ability. If someone has just got a job, he should go for a scheme which has low life insurance coverage and more asset creation and saving part. In case of a young couple, the importance should be given to both the wealth creation and life insurance coverage as now the individual has the responsibility of spouse and also that of prospective children. Similarly, for a parent having responsibility of his child’s marriage or higher studies, he should look for flexibility in the ULIP scheme. These include premium holidays where exemption is given for 2-3 years or premature liquidation to meet the costly expenses of study or marriage. Similarly, for an elderly person with financially independent children should give less weightage to the life cover part as no one is dependent on him.
Individual’s Ability and Situation
The choice of ULIP also depends on the skill-sets of the policy holder. If someone is good at stock markets, he should look for the SWITCH facility in ULIPs to constantly change the portfolio (from equity to bonds or bank deposits) according to market conditions. Similarly, a layman should go for the background and brand of the insurer as he can’t keep constant watch on the performance of the portfolio.
Where can we get one?
Here is a list of few agencies which provide ULIP- insurance schemes:
Aegon Religare, ICICI Prudential, LIC, SBI, Kotak, Bharti AXA, Tata AIG, AVIVA Life, Future Genrali etc. We can visit their website or contact them through agents to purchase any insurance plan.
In case of further queries or doubts about ULIPs and how to buy one, do leave us a comment.
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