What is ULIP?

ULIP or Unit linked insurance plan (ULIP) is a life insurance solution that provides the benefits of risk protection as well as flexibility in investment. That means ULIPs or Unit Linked Insurance Plans are market linked insurance plans, where in a part of ur premium goes towards providing a life cover, and the balance (after charges have been deducted) is invested in stock market (or equities as they are also known). Hope now you have a basic idea on what is a ULIP. Here’s more.

More on ULIP Policy

Hence as can be easily inferred, the ULIP investment value depends on the condition of the stock market. ULIP policy are of various types e.g. diversified equity funds (quite risky), balanced funds (balanced), debt funds (not risky but low growth) etc. Investors can pay their premiums annually, semi-annually, quarterly or monthly. They also have the flexibility to alter the premium amounts during the policy’s tenure. For example, if an individual has surplus funds, he can enhance the contribution in his ULIP policy. Conversely an individual faced with a liquidity crunch has the option of paying a lower amount (the difference being adjusted in the accumulated value of his ULIP). They can also shift their investments across various plans/asset classes (diversified equity funds, balanced funds, debt funds) either at a nominal or no cost.

ULIP Returns

It is important to remember that in a ULIP, returns though are high, but the investment risk is generally borne by the investor. So even though u mite have been insured for a sum of 1 lakhs, if ur policy value at the time of maturity is only Rs 20,000, then u mite end up getting only this much amount.