The biggest reason to buy an insurance policy is to make sure that your family has financial coverage in case of any unfortunate event. However, many policies offer more than just life coverage. All of these plans are based on your needs at different stages of your life and can fulfill a wide range of financial goals you may have. This includes protection, savings, child education, retirement, wealth creation, etc. There is one type of life insurance policy that can allow you to reach all of these financial goals. It is known as a Unit Linked Insurance Plan (ULIP). Go through the below details to know more.
How ULIPs Work?
Unit-linked insurance plans provide the benefits of life insurance and wealth creation in one roof. The premium you pay towards your policy is put into equity or debt funds based on your preference and risk appetite. You can choose from various plan variants, which vary in fund allocation to equity and debt.
ULIPs work on this concept of units. The money you pay as the premium is used to purchase units. These units are then segregated into insurance coverage or investment. Each of these units have a face value. Adding up the value of all these units gives you the amount of money you are investing. Once you have invested the money, the value of every unit at a certain point in time is known as Net Asset Value (or ULIP NAV). As the funds of your choice perform better or worse, the NAV increases or decreases. Meanwhile, your insurance coverage remains intact.
Investment is something that everybody wants to do. However, not everybody has the knowledge and the skill to do it properly. While research will only get you so far, there will always be some things you will not know. This is where you will require professional advice and assistance. With ULIPs, you don’t have to worry about where you can find someone to guide you in the right direction. Once you put money into ULIP funds, they are invested in multiple market-based investments by experienced professionals. This personnel, known as fund managers, hold a knack for making the right financial decisions. Hence, they can better guide you in how to put your money into the right investment opportunities. These managers offer solutions for every problem related to the plan. So, if you are feeling confused about investing in a ULIP, the best person to talk to is a fund manager. They can clear your doubts and get you invested with ease. These managers often have a team of analysts, researchers, economists, etc. This helps you make your investment decisions more informed.
Combining insurance and investment
When it comes to any kind of insurance, insurance providers may not offer a lot of flexibility, especially after buying the policy. While there is always some wiggle room with minor changes you are allowed to make, the major terms and conditions of your life coverage remain the same. These can only be changed by the insurance provider and include things like coverage inclusions, exclusions, premium, level of coverage, etc. Therefore, in other types of life insurance, there are many places you would have to make compromises. Additionally, once you enter into the contract with the insurance provider, it is better to stick with the policy before you can find a better option.
On the other hand, ULIP plans work based on the flexibility of the policyholder. If you have a ULIP plan, you get many options in terms of coverage. A lot of insurance providers offer ULIPs that give the customer the ability to change their coverage. You can increase your coverage after buying the policy or you can decrease it depending on your situation. This is because ULIPs work on units. After you pay your premium, you get a certain number of units. You can divide and allocate these units into your coverage and investment funds. Depending on the market performance of your funds, you can transfer units back to coverage or put more of them into investment.