What is unit linked insurance plans (ULIPS)?

1. What is unit linked insurance plan?

ULIPS provide for benefits of protection and flexibility in investment, it is insurance cum investment plan. The allocated premiums will be applied to purchase units as per the fund type based on the ongoing NAV. NAV is the value per unit of the scheme. They provide multiple benefits like life protection, investment and savings flexibility, options to take additional  covers, tax planning, etc. but they are riskier compared to other schemes.

2. Who can buy a unit linked insurance plan?

You can buy a ULIPS as an investment purpose, policyholder have a right to choose between an investments options of debt and equity. It should balance with both your investment and insurance needs.

3. What is difference between investing in ULIPS and Mutual fund?

• Both ULIPS and mutual fund carry market risk and depend on market returns
• Mutual fund are regulated by SEBI and ULIPS are regulated by IRDA
• ULIPS are combination of both investment and insurance, mutual fund is pure investment
• ULIP allow you to increase your life cover while keeping your premium same
• Mutual fund are best suited for those who focus on investment and medium term returns, on the other hand ULIPS are for those who want to invest as well as get benefit of insurance in long term.

4. What are the types of ULIP plans available in market?

Types of ULIPS depend on the purpose of it such as ULIP for retirement, ULIP for wealth creation, children education and health benefit.

5. How to choose a best ULIP plan to get maximum benefit?

You should know the percentage of risk that you can take, understand the charges of different plans, compare the past performance of your plan, decide the amount of premium to be paid and risk cover you need, know about how much premium is being insured and how much is invested, find out if any tax benefit is being offered, check if there are any switching options available and charges on it.