Unit Linked Insurance Plans, or ULIPs, are comprehensive insurance products. For a policyholder, a ULIP is a life insurance policy with substantial-high payouts at maturity. In other words, a policyholder receives both life insurance cover and high investment returns.

Let us delve deeper into what a ULIP plan is, its variants, and its key features.

What is ULIP?

A ULIP, as previously stated, is a mix of insurance and investment products. A policyholder invests in a ULIP plan by making monthly or yearly premium payments. Following that, a portion of the premium is used to provide insurance coverage to the policyholder's family, while the remainder is invested in market-linked financial instruments.

Based on the risk tolerance and financial objectives, the policyholder can determine how much money to invest in market-linked assets. These include stocks, debts and other financial instruments. Furthermore, the insured is eligible for tax benefits under sections 80C and 10d(D) of the Income Tax Act.

What are the Different Types of ULIP plans?

There are various types of ULIP plans available, and they can be classed as follows:

  1. Classification by Investments
  1. a) Equity-based

The funds are invested in equities. It is appropriate for investors with a high-risk tolerance who can withstand stock market volatility.

  1. b) Debt-based

The funds are invested in debt instruments such as government bonds, debentures, fixed income bonds, corporate bonds, and so on. These are less risky and offer a lower return.

  1. c) Liquid funds

In this case, the ULIP plans invest policyholder funds in highly liquid money markets such as call money, treasury bills, and certificates of deposit. These are intended for short-term investments and are recommended for investors with low-risk tolerance.

  1. d) Balanced funds

In this case, the ULIP plans invest in both shares and debt instruments. The goal is to reduce risk while providing excellent returns. The consistent gains from debt instruments offset the negative returns from equities.

  1. Classification by Purpose
  1. a) For Retirement

In retirement plans, the premium is invested to create a corpus. Following retirement, the collected money is paid to the policyholder in the form of annuities.

  1. b) For Children Education

In the event of the policyholder's unexpected death, the child policies assure payment to dependent family members. The funds can be utilized to fund children's education.

  1. c) For Wealth-Creation

In addition to the benefits of ULIP insurance, investors park their funds to earn high returns over a long period. The ULIP plans are perfect for those who want to invest in high-yielding financial instruments while also receiving insurance coverage.

What are the Important Features of ULIP?

Some of the fundamental characteristics of ULIP plans make them an appealing investment destination for participants.

  1. Flexibility

The best ULIP plans allow policyholders to switch their investments between loans and equities as per requirement. Furthermore, a policyholder has the option to invest additional funds in addition to his normal premium payment.

  1. Partial Withdrawal Facility

The Policyholders have the option to withdraw funds in part in the event of a financial emergency or to cover financial needs during important stages of life.

  1. Liquidity and Transparency

The best ULIP plans in India are highly transparent in terms of charges, historical performance, and plan value. Furthermore, these are extremely liquid, allowing policyholders to make partial withdrawals.

If you understand what is a ULIP policy and are satisfied with the answers, you may use a ULIP calculator to determine the expected returns depending on the premium paid and age. Following that, you can buy a ULIP plan online.