ULIP V/S Traditional Plans

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ULIP policies offer many benefits which are not available in traditional insurance products, like partial withdrawal, lock in for only 3 years, high return, flexibility to choose insurance cover, top-up facility, fund options.

Let us compare traditional insurance policies with ULIP based on these features.

  • Partial withdrawal.

Unlike traditional policies, most of the ULIP policies allow you to withdraw part of your investment after 3 years.

This helps a lot for investor as they can off- load their money as per their need.

  • Lock-in for 3 years only.

In traditional policies one has to pay high surrender charge if they want to discontinue it, however most of the ULIP policies can be discontinued after 3 years. Here they can

a) Stop paying premium and keep money invested to get all the benefits.

b) Withdraw entire amount (As per current value) with no or little surrender charge.

For investors who review their investment periodically can take this opportunity to check if their investment is going in the right direction or not and is giving the expected return?.

  • High returns

No insurance plan can match the return of ULIP in the long period but at the same time this return is not guaranteed and you may even receive amount which is less then what you have invested.

  • Multiple payment options (regular premium (like SIP, single premium, Top-up).

ULIP policies allow various payment methods like single premium, regular premium payment which works similar to SIP additionally it allow you to invest additional amount at your convenience in the form of Top-ups.

  • Flexibility to choose insurance cover.

This is also one of the most important features of ULIP.

In traditional policies you have to select Sum Assured based on which you pay your premium but in ULIP you have the flexibility to choose your Sum Assured let whatever be your premium(With little restriction like For premium of x amount S.A can not be greater then y!). Many ULIP also allow you to increase/decrease risk cover as per your needs.

  • Option to choose Rider

You can opt for rider available to ULIP plans and you will be charged only on the opted riders.

  • Cooling of period.

Unlike mutual fund (with which many people compare ULIP with), ULIP allow to withdraw your money (after deducting processing charges by insurer) 15 day from issue of certificate if investor is not satisfied with term and conditions.

  • Flexibility to choose fund options.

All ULIP plan provide number of fund depending on your risk taking capacity.

You can opt for the fund type depending on your choice of high growth or lesser risk.

  • Free Switches.

Free Switches allow you to move your money from high risk fund to low risk fund and vice versa depending on market condition and your risk taking capacity.

  • Tax benefit

Investment in ULIP is eligible for tax deduction.

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