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There is a lot of buzz around investing in Unit-Linked Investment Plans (ULIPs) nowadays. The buzz is attributed to the profits and advantages that ULIP policy provides. In simple terms, ULIPs can be defined as the combination of insurance and investment. Like all good things, ULIPs are also shrouded with myths, which need to be busted. This article is aimed at debunking the top 6 ULIP myths that are prevalent in the market.
• Myth 1 -
They are high in risk. On the contrary, ULIPs are chosen to reduce the risk by opting for different funds having varying objectives. You can select these funds based on your style of investing, if you are a risk taker, you can opt for a more aggressive fund or if you are a risk-averse person, you can opt for a more conservative fund. The risk factor is also considerably reduced as ULIPs offer the option of switching between funds depending upon your risk appetite at that specific time. 
• Myth 2 -
ULIPs don’t allow liquidity so are not suitable for an emergency. In reality, you can always opt for the partial withdrawal in ULIP. This option will enable you to withdraw certain part money after the lock-in period is over and that too, without paying any cost. The balance units which are not withdrawn will remain invested.
• Myth 3 -
Discontinuity of ULIP. A common misunderstanding is that they cannot be discontinued. In fact, not only ULIPs can be discontinued, after the completion of the lock-in period, you need not pay any surrender charges to discontinue the same after the lock-in period has ended.
• Myth 4 -
Life cover and market volatility are inversely proportional. One should note that, irrespective of market volatility, life cover does not change and that, upon the death of the person, fund value or complete life cover, whichever higher is paid. Thus, in no way the life cover is affected.
• Myth 5 -
ULIP plans do not provide accident cover and health cover. An important point to be noted over here is that ULIPs offer life cover in addition to investment; hence they have all the riders such as Hospital Cash Benefit (HCB), Accidental Death Benefits (ACB) among others. In addition, the investor can also make a partial withdrawal to match his cash requirements in cases of calamities or emergency.
• Myth 6 -
They do not provide good returns. However, if you consider the investment horizon of more than 5 years, ULIPs are your best bet to provide good returns. What’s more, is that you can alter and customize the selection of a plan based on your investment attitude. ULIPs offer insurance, which is not offered by any other pure investment vehicles.
Myths are nothing but barriers to your good returns and healthy investment. If one studies the plans carefully, keeps his eyes open and follows a rational view, myths cannot impediment one’s investment portfolio. With companies offering competitive Unit Linked Insurance Plans, a lot of individuals opting for it, we can expect a rise in awareness of ULIP’s benefits, thus resulting in the reduction of myths surrounding the same.
4 Minute | 
