What is Unit Linked Insurance Plan (ULIP)? What are the benefits of ULIPs?

We explain what Unit Linked Insurance Plans (ULIPs) are, and how they benefit your financial outlook for the future.

Your financial needs can change on a frequent basis. When things change continuously, there are two important financial aspects you should always keep in mind: savings and timely protection. In the market, you may find a number of options that focus individually on these two aspects of your finances.

Then there comes along a savings opportunity that offers the dual benefit of life insurance protection as well as growth on the capital. This is known as the Unit Linked Insurance Plan (ULIP) and it invests your money over a longer term to create wealth for the future.

The investment is made in high-grade market securities, both equity and debt. The ULIP plan is an important addition to your financial portfolio, as enumerated below.

The main benefits of ULIPs

* Unit Linked Insurance Plan (ULIPs) are gaining wide popularity owing to fund options that offer a stable performance or low risks or both. They are offered by leading insurance providers, banks and fund houses in India.

* Along with life insurance protection for your loved ones, your money is also bound to get good returns over the vesting period. In short, the unit-linked insurance plan is a life insurance plan with a market-linked appreciation on investment.

* When you invest in a Unit Linked Insurance Plan (ULIP) policy, one part of the money is paid towards the policy premium. The other portion is invested in high-grade securities.

Consider the most important ULIP benefits:

1. ULIP plans offer life coverage plus investment appreciation, with your money growing with equity and debt investment over time. The best ULIP plans offer stable and high annualised returns. Thus, you create an avenue for wealth over the long run.

2.The ULIP offers a lower proportion of risk than most other investments , that are connected to the markets. The fund house or insurance provider takes care to see that the money is invested in high-grade securities, so the appreciation is higher with a lower risk. Your investment in the ULIP policy may accrue a certain percentage of returns every year, with little chance for negative performance. Besides, you get tax benefits under Sec 80C for the premiums paid for the ULIP plan.

3.You don’t need to manage your unit-linked insurance plan by yourself. There is a fund manager assigned by the insurance provider or fund house, who does the actual overseeing of the plan. However, you have the liberty of examining the annualized growth and even changing some of the unit allocations so that the appreciation on investment is higher. Plus, the fund manager can monitor daily and monthly Net Asset Value (NAVs) to steer the policy in the right direction.