Unit Linked Insurance Plans

 By Jennie Kakkad 

Higher the rate of inflation, lesser is the value of money. This is a thumb rule to be kept in mind while making any long-term investment. Generally, at the time of making the investment, the return promised at maturity, usually 10-20 years, looks attractive. But when the realized amount is received on the maturity date, its value normally gets reduced to peanuts. This is because the rate of return could not match to the rate of rising inflation and other economic variables.

To overcome such glaring gaps, a Unit Linked Insurance Plan (ULIP) is introduced that help investors to get a fair return on their investments. It is a type of an insurance policy where the value of the policy changes with the market trends. It is basically a combination of an insurance policy and a mutual fund aimed at providing both flexibility and stability for the investment. In simple words, it can be said that the returns are market-linked in a ULIP.
In a ULIP, the policy taker receives a certain number of units, according to the amount of investment he wishes to make, at their existing net asset value (NAV). The amount invested in the plan is further re-invested in different portfolios like that of stocks, debentures, futures, etc. Therefore, as the value of the portfolio changes, the NAV varies accordingly. For instance, in a bullish market, the NAV will increase thereby increasing the value of the units and the overall ULIP.

ULIPs are ideal for investors who prefer secured investments but are ready to take a small degree of risk for better returns. Just like in any pure life insurance contract¸ the money is paid to the beneficiary in the event of death of the policyholder. Similarly, in a ULIP, the money is benefits of the plan are extended to the family or other beneficiaries in case of the unfortunate happening.

A wide range of ULIPs, with different features and benefits, are offered by almost all the insurance companies. You can choose a plan depending upon the desired investment amount, tenure, and the expected return. The companies have a team of professionals who can visit you personally and explain the benefits of different policies.

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