What are ULIP?

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ULIP stands for Unit linked insurance products.

They are the most happening products in the Indian insurance industry,

90% of business of few of the Private insurance companies is coming through ULIPS.

So what are ULIPS? And why they are so popular?

In simple words ULIPS are nothing but a mutual fund with insurance cover attached to it.

Because of the exposure to equity it beats all the traditional insurance plan in terms of returns. But in the same time unlike traditional insurance products they do not provide guaranteed return.

Entry Load of ULIPS is quite higher then Mutual Funds, and it is normally in range of 5% to 20% of investment.

Apart from Entry load, there are many other charges that one need to pay each year and because of these charge ULIPS are very costly for short term

ULIPS are better place to invest money if you have longer horizon of 10 years or more.

For every 100 Rs invested part of your money goes toward various charges which include insurance cover and rest is invested.

Investor (or say Policy Holder!) can choose fund depending on his risk taking capability.

The fund type would be Growth(With high risk, high return), Balanced(moderate risk, moderate return).

secured(Low risk, Low return), There might be more variety available depending upon insurers and type of ULIPS.

One can also switch between different funds and upto certain number of times in a year it is free.

Like MF, on investing money Investor will get Units based on current NAV.

Depending on the performance of the fund NAV is calculated.

Maturity amount is calculated based on the NAV and number of unit policy holder is holding.

Why ULIPS are popular?

Till few years back Insurance for many means saving tax and get 6 to 8 % return on investment and that too with very poor liquidity facility.

But then comes ULIP which not only provide you liquidity,flexibility,tax benefit coupled with the chance of earning a high return(Off course with risk).

Because of all this people now a days are getting attracted toward ULIPS.

Also there are many other factors like

1) Indian stock market was zooming till 2008.

2) Marketing style.

We will discuss all the positive and negative sides of ULIP in my coming posts.

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ALLkunwar said...

in-depth information, but can be understood by beginners too....five stars...

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