Types of Insurance Plans - Traditional or Unit Linked (ULIP: Unit Linked Insurance Plan)
Insurance Plans - At a glance
Broadly, insurance plans can be distinctly divided intoВ ULIP В (Unit Linked Insurance Plans)В and traditional plans. A brief detail of both segments:
ULIPs (Unit Linked Insurance Plans)
ULIPs. or Unit Linked Insurance Plans, have gained high acceptance due to the attractive features they offer. Benefits include flexibility, Transparency, Liquidity, and Fund Options.
A ULIP offers the customer an acute degree of flexibility: the flexibility to choose the Sum Assured, and to choose the desired premium amount. ULIPs give the customer the option of changing the level of Premium/Sum Assured even after the plan has started, and the flexibility to change asset allocation by switching between funds with ease.
ULIPS offer a high degree of transparency, where all charges in the plan as well as the entire net amount invested is made known to the customer. ULIPs also offer the convenience of tracking your investment performance on a day to day basis, so you can decide instantly where you want your assets allocated.
A ULIP offers you the option of withdrawing money a few years into the plan, allowing for the exigencies of life. Alternatively, a ULIP will
also allow for partial/systematic withdrawal should the need arise.
Fund Options В
A ULIP will offer you a wide choice of funds, ranging through equity, debt, cash, or a combination of the three. The customer is also afforded the option of choosing your fund mix based on your desired asset allocation.
These are the oldest types of insurance plans available. These plans cater to customers with a low risk appetite. Some of the common features of traditional plans are:
- Steady Investment
- Major chunk of investible funds are in debt instruments.
- Steady and almost assured returns over the long term.
- Death benefit is Sum Assured + guaranteed & vested bonus.
- Helps in asset creation as they are for a long tenure.
- Premium to Sum Assured ratios are fixed for each plan and age.
- Generally withdrawals are not allowed before maturity.