HOW ULIPS CAN MAKE YOUR RICH .
Unit Link Insurance Plans
Charges charged by insurance companies can be quite confusing and varying; hence, investors should compare them with similar mutual funds to see if charges quoted are reasonable.
Features of ULIPs include:hat are the benefits of ULIPs?
ULIP provides multiple benefits to the consumer. The benefits includes:
- Life Protection
- Investment and Savings
- Flexibility
- Adjustable Life Cover
- Investment Options
- Transparency
- Options to take additional cover against (a) Death due to accident (b) Disability (c) Critical illnness (d) Surgeries
- Liquidity
- Tax-planning
As transparency was missing and returns were assued IRDA (Insurance Regulatory Development Authority) came forward to bring new guidelines for ULIP
More importantly ULIPs offer investors the opportunity to select a product, which matches their risk profile; for example an individual with a high risk appetite can shun traditional endowment plans (which invest about 85% of their funds in the debt instruments) in favour of a ULIP which invests its maximum corpus in equities.
How to Select right product mix in ULIP?
While for endowment and other traditional insurance plans, the sum assured is the main stream, where as in ULIPs it's the amount of payment you make becomes the corner stone. ULIPs are nothing else, but the scheme like mutual funds, promoted by insurance companies in terms of their structure and functioning where NAV term becomes the main parameter for returns.
Investors have the choice of enhancing their insurance cover, modifying premium payments and even opting for a distinct asset allocation than the one they originally opted for. Also if any unforeseen eventuality were to occur, in case of traditional products, the same assured is paid along with accumulated bonuses; conversely in ULIPs, the insured is paid either the sum assured or corpus amount whichever is higher. While ULIPs can provide the added value to one's insurance portolio and financial planning; the same is not without its drawbacks as well. Higher expenses, rigid defination of insurance and the impact of markets on the corpus can definitely make it a complex scheme to understand. Thus it also becomes tedious for one to make the prospect understand the ULIP plans. One needs to make the informed decision, while investing in ULIPs and that's the key factor. So, make it clear that Unit Linked Insurance polices (ULIPs) are insurance policies that combine risk coverage with investing in the stock/debt markets i.e. getting insurance via mutual fund scheme mode. Payment made for Ulips gets invested in specific types of portfolios that one chooses. The policy typically pays back, based on market returns on investments at the end of the insured period. Therefore, it forms an interesting savings instrument that can get good risk cover as well.