What are ULIP Plans and their advantages?

Do you know that you can make investments and receive insurance in a single plan? This is possible by purchasing Unit Linked Insurance Plan which is commonly referred to as Unit Linked Insurance Plan. Life insurance companies provide ULIPs which come under an integrated plan of investment and insurance. A portion of the premium is used for insurance cover and the remaining part is used for investments in debt and equity schemes. The money which is collected by the insurance companies is invested like in mutual funds. The holders of the policy choose the fund types or a combination of funds based on their investment requirement and appetite.

Just the way investors are allotted units in mutual funds, there are units are allocated to ULIP holders. Every single unit has a Net Asset Value or an NAV which is declared on a regular basis. Some of the ULIP Investment include features such as increasing or decreasing the level of protection, top-up facilities, switching between several funds, additional riders, tax benefits, etc. Some of the safe options for ULIPs come by investing a large chunk of invested funds in debt instruments. ULIP Plans or schemes have applicable charges associated with them. Some of the major charges include fund switching charges, administration charges, withdrawal charges, mortality charges etc.

There are a number of benefits associated with Unit Linked Insurance Plans such as flexibility in investments. As an investor, one can select the investment ration and sum assured with regard to the annual premium. There are many insurance companies that provide ULIP Plans in India such as Exide Life Insurance, SBI Life, HDFC Life and many others. The other advantage of ULIPs is that they provide transparency. The estimated IRR, charge structure and value of investment is shared with the buyer before he or she makes the purchase. Post the purchase, the policy holder is consistently updated about the investment portfolio.

ULIPs offer liquidity through the advantage of partial withdrawal during times of emergency. Besides, ULIPs help one stay disciplined in terms of savings. The average unit costs in ULIPs are lower as compared to one time investment. ULIP is also a great solution for long term investments and risk cover. These also fit well for investors who do not want to engage in the stock market, however, enjoy benefits associated with growth linked to the market. Therefore, ULIPs are a one-stop solution.