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Unit Linked Insurance Plans 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 of the ULIP 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 in such a manner that the protection element and the savings element are distinguishable, and hence managed according to your specific needs. In this way, the ULIP plan offers unprecedented flexibility and transparency.
ULIPs, are distinct from the more familiar ‘with profits’ policies sold for decades by the Life Insurance Corporation, or by the private insurers in the last few years.
Which is better, unit-linked or ‘with profits’?
The argument in favour of unit-linked plans are that — the investor knows exactly what is happening to his money and two, it allows the investor to choose the assets into which he wants his funds invested. The ULIP investor however often bears a higher amount of risk, more so in volatile market conditions, winning the argument in favour of traditional policies.
The transparency of a ULIP makes the product more competitive, but can also be a lot more confusing as compared to a simpler bonus that traditional products offer. So your choice of instrument depends upon your risk appetite.
If you are looking to purchase a ULIP product or invest in one, speak to our certified experts who will not only help you select the best instrument, but also find the best fit as per your existing investments and portfolio.
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