Unit Linked Insurance Plan - Dual Benefits at Low Premiums‎

ULIP or Unit Linked Insurance Plan is a type of insurance plan which do not only gives insurance coverage to the insurer but also allows the insurer to invest a desired sum within a single integrated insurance plan.

It is, in fact, the blend of both insurance against risk coverage to the beholder and an investment opportunity to the investor where the investor can endow desired amount of money in the form of stocks, desired number of bonds as well mutual funds.

How Does It Work?

Unit Linked Insurance Plan enables a person to enjoy dual benefits at low premium costs. Its working principle is simple and yet effective. It employs a portion of the invested sum of money into insuring the investor and the rest of the sum in making investments as in debt or equity safety much like mutual funds. Considering the benefit on the demise of the insurance holder, ULIPs can be classified in two types:

1. The nominee receives a higher sum than the money assured and the value of the fund.
2. The nominee receives the amount of the amount guaranteed and the value of the fund in case of death of the insurance holder.

Targeted Investors of ULIPs

The double advantages of these insurance plans attract more investors in the market. However, this Unit linked plans are more suited to the investors:

• Who want close track of their investments – These plans permit the policy holder to keep close eye on their investments and at the same time they also allow the investor to switch their money between different funds.
• Who want a long term plan for investments – Unit Linked Insurance Plans also let an investor to make medium to long tenure ventures.
• With diverse risk taking capacities – ULIPs provide wide range of fund choices in terms of their diverse risk factors. It offers plans to the one with the least risk hunger and also to those who have high risk handling abilities.
• Across various stages of life – It ensures different types of unit linked plans for all types of needs and stages of life.

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Benefits of Unit Linked Plans

The dual function of Unit Linked Insurance Plans makes them more desirable to the investors. It has the following advantages:

• Great return policies – It provides a great prospect to earn money returns which are mostly market-linked as a portion of invested premiums in the funds which are market-linked. These market-linked finances in turn invest in various market components like debt and equity safety.
• Good life coverage – A Unit Linked Insurance Plan offers dual advantages of life coverage and savings through the market associated returns. Thus, an investor receives good coverage to his needs at one hand and also makes investments to bring in higher money returns on the other hand. This helps in making good wealth over a long period of term.
• Flexible choices – ULIPs provide a wide variety of choices to the policy holder in terms of switching between different plans according to one’s changing requirements, withdrawing only a portion of the sum invested (conditions applied) and investing additional amount of capital over the existing amount of premiums when preferred.

Paying Premiums in a Unit Linked Plan

• Single Payment Plan – ULIPs allow their investors to make one large premium just at the opening of the investment term.
• Standard Premium Plan – It allows choosing the investors the interval of the premiums paid – annually, twice a year or on the monthly basis.
• Choice of Deciding Number of Payments – Investors are free to decide the interval of time and count of times they want to pay their premiums annually.

Various Charges Deducted in ULIPs

No policies come without any charges. So is ULIP. Various charges deducted towards various administrative services are listed below:

• Administrative fees: A certain amount of money is to be deducted as for the maintenance of the policy on a monthly basis. 
• Fees for the management of funds: A specific amount, decided by the worth of the fund invested, is to be deducted as an expense for running the fund.
• Switching of Funds Charges: Of course an investor is permitted to switch between different funds at different times according to his changing wishes but not without expenses. These policies give provisions to make specific number of free switches between various funds but once you exceed the given number of free switches you are subjected to charges.
• Charges for Surrendering before the Completion of the Term Period: A policy holder has to pay charges for the withdrawal of the insurance plan prematurely. The charges are calculated upon the value of the invested fund.
• Partial Withdrawal Fees: These policies allow large withdrawals but with certain withdrawal fees.

Tax Saving Benefits

A Unit Linked Insurance Plan not only gives a golden opportunity to the investors to enjoy its dual facilities but also proves beneficial for tax saving purposes. ULIP is qualified for saving income tax up to the sum of 1lack and 50 thousands.