Broadly, insurance plans can be distinctly divided into ULIP (Unit Linked Insurance Plans) and traditional plans. A brief detail of both segments:

ULIPs (Unit Linked Insurance Plans)

-ULIPs, or Unit Linked Insurance Plans, have gained high acceptance due to the attractive features they offer. Benefits include flexibility, Transparency, Liquidity, and Fund Options.

ULIPs are a category of goal-based financial solutions that combine the safety of insurance protection with wealth creation opportunities. In ULIPs, a part of the investment goes towards providing you life cover. The residual portion is invested in a fund which in turn invests in stocks or bonds. The value of investments alters with the performance of the underlying fund opted by you.

Simply put, ULIPs are structured such that the protection element and the savings element can be distinguished and hence managed according to your specific needs, offering unprecedented flexibility and transparency.

Flexibility

A ULIP offers the customer an acute degree of flexibility: the flexibility to choose the Sum Assured, and to choose the desired premium amount. ULIPs give the customer the option of changing the level of Premium/Sum Assured even after the plan has started, and the flexibility to change asset allocation by switching between funds with ease.

Transparency

ULIPS offer a high degree of transparency, where all charges in the plan as well as the entire net amount invested is made known to the customer. ULIPs also offer the convenience of tracking your investment performance on a day to day basis, so you can decide instantly where you want your assets allocated.

Liquidity

A ULIP offers you the option of withdrawing money a few years into the plan, allowing for the exigencies of life. Alternatively, a ULIP will also allow for partial/systematic withdrawal should the need arise.

Fund Options

A ULIP will offer you a wide choice of funds, ranging through equity, debt, cash, or a combination of the three. The customer is also afforded the option of choosing your fund mix based on your desired asset allocation.

ULIP Features

ULIPs are a category of goal-based financial solutions that combine the safety of insurance protection with wealth creation opportunities. In ULIPs, a part of the investment goes towards providing you life cover. The residual portion is invested in a fund which in turn invests in stocks or bonds. The value of investments alters with the performance of the underlying fund opted by you.

Simply put, ULIPs are structured such that the protection element and the savings element can be distinguished and hence managed according to your specific needs, offering unprecedented flexibility and transparency.

In a Nutshell

: – ULIP gives you wealth plus life cover

: – Stay invested and enjoy their power.

Working of ULIP:

It is critical that you understand how your money gets invested once you purchase ULIP.

Once you decide the amount of premium to be paid and the amount of life cover you want, the insurer deducts some portion of the premium upfront. This portion is known as the Premium Allocation charge and this varies from product to product. The rest of the premium is invested in the fund or mixture of funds chosen by you. Mortality charges and administration charges are thereafter deducted on a periodic (mostly monthly) basis whereas the fund management charges are deducted on a daily basis

Since the fund of your choice has an underlying investment – either in equity or debt or a combination of the two – your fund value will reflect the performance of the underlying asset classes. At the time of maturity of your plan, you are entitled to receive the fund value as at the time of maturity. The pie-chart below illustrates the split of your ULIP premium in a graphical format.

Types of ULIP:

One of the big advantages that a ULIP offers is that whatever be your specific financial objective, chances are that there is a ULIP which is just right for you. The figure below gives a general guide to the different goals that people have at various age-groups and thus, various life-stages.

ULIPs for Retirement Planning:

Retirement is the end of active employment and brings with it the cessation of regular income. Today an increasing number of people have stated planning for their retirement for below mentioned reasons.

ULIPs for Wealth Creation:

ULIPs are the right insurance solutions for you if you are looking for a strong wealth creation proposition allied to a core insurance benefit. Such plans are ideal for people who are in their late 20s and early 30s and by investing in such a plan get the flexibility of using it to fund any of their long-term financial goals such as purchase of a house or funding their childrens education. The added element of life cover serves to make these plans a wholesome financial investment option.

ULIPs for Childrens Education:

One of the most important responsibilities you have as a parent is to ensure that your child gets the best possible education that can be provided. Apart from conventional schooling, it becomes important to expose your child to different activities such as dance, painting and sports training for holistic development. As a parent, you want to ensure that their development is not hampered either due to rising costs or unforeseen circumstances.
Today there are ULIPs that offer money at key milestones of your childs education thus ensuring that your childs education continues unhampered even if something unfortunate happens to you. While, the death of a parent is an irreparable emotional loss, child education plans safeguard the child against the financial ramifications of the death of a parent.

Traditional Plans

These are the oldest types of insurance plans available. These plans cater to customers with a low risk appetite. Some of the common features of traditional plans are:

A. Steady Investment

1. Major chunk of investible funds are in debt instruments.

2. Steady and almost assured returns over the long term.

B. Features

1. Death benefit is Sum Assured + guaranteed & vested bonus.

2. Helps in asset creation as they are for a long tenure.

3. Premium to Sum Assured ratios are fixed for each plan and age.

4. Generally withdrawals are not allowed before maturity.