Unit Linked Insurance Plans (ULIPs)

ULIPs are insurance policies that come with dual benefits- growth and protection. These plans come with the combined benefits of insurance and investment under one single plan.

There is a whole variety of ULIPs on offer. You can choose anything from Wealth creation ULIPs to Retirement Planning ULIPs, depending on your particular investment profile and desired portfolio.

Out of the various kinds of insurance policies available these days, one which is really unique is the Unit Linked Insurance Policy/Plan, commonly known as ULIP. ULIPs combine the dual benefits of an insurance policy and market-linked appreciation of your funds. There are many types of ULIPs and each needs to be mindfully understood to purchase the right kind that lines up with your needs and goals.

ULIPs for retirement planning: Retirement brings an end to your regular income, therefore these plans work on investing a  portion of your income during your earning years, in a regular disciplined manner over a period of time. After the maturity of your policy, you are allowed to withdraw a lump sum of the money accumulated. Post that you receive fixed regular payouts for the rest of your life.

ULIPs for child education: This ULIP is for your children and focuses on catering to their needs at different stages of life. It aims to provide financial support for expenses related to your child’s future, such as education, marriage etc. Hence, this ULIP helps your children realise their dreams even if you are not around to support them.

ULIPs for wealth creation: Who does not want to be rich? If you are the kind of person who wouldn’t mind a little extra wealth, investing in one of these plans is the way to go. Choose from the different kinds of ULIPs for wealth creation and get a huge return on your investments.

ULIPs for health solutions: This is an extremely important, robust health plan that every individual must consider purchasing. These kinds of ULIPs will help you bear health related expenses and some might even fund your future health insurance charges.

ULIP is an abbreviation for Unit Linked Insurance PolicyPlan. What does unit linked mean? It means that it is linked to units of investment which are made in the capital and money markets. Hence, ULIPs are a combination of life insurance and market linked investment. Therefore, it provides you life cover as well as capital appreciation linked to the capital markets. 

The full amount of premium paid is not allocated to purchase units. Insurers allot units on the portion of the premium remaining after providing for various charges under the plan. Thus, the portion of premium used to purchase units varies from product to product. 

The total monetary value of the units allocated is invariably less than the amount of premium paid because the charges are first deducted from the premium collected and the remaining amount is used for allocating units. 

Let us get familiarised with some common terms that you will come across while investing in ULIPS 

Unit Fund: The entire invested amount from various investors in a scheme is pooled together after deducting the initial expenses to form a fund that is called a Unit Fund.

Unit: One single part of the total invested amount of the insurance fund is called a unit. 

NAV: NAV or Net Asset Value is the value of each unit of the fund on a given day. The NAV of each fund is displayed on the website of the respective insurers.