SAVE FOR LONG TERM GOALS WITH UNIT-LINKED INSURANCE PLAN – KNOW BENEFITS, FEATURES AND HOW ULIPS WORK

Life Insurance

- Ashwini Kumar Sharma

When you want to keep your savings and protection needs in one place, a unit-linked insurance plan (Ulip) is the investment option that you may consider investing in. Ulips is a financial instrument that plays its role in creating wealth for achieving the long term goals and also providing protection against any untimely demise of the bread earner of the family. A Ulip is essentially a bundled investment that combines a life cover with an investment plan. It best suits an investor who is not able to keep protection and investment needs separate.

Unlike in endowment plans, in Ulips for a particular annual premium amount, you can decide how much insurance you want, within a certain range. After costs for insuring you for that amount are deducted, the rest of the funds are invested.

Of the premium paid, a part of the premium goes towards the mortality charges, that is, the cost of buying a life cover. The premium paid by you, less any charges to be deducted, is used to buy units in the fund selected by you at that day’s unit price, or NAV. The rest, and after deducting costs, gets invested in different fund options where the choices range from 100 per cent debt market products to 100 per cent equity, with varying mixes of both in between.

If you survive the policy term, you get an amount equal to the number of units you hold multiplied by its NAV, which is the fund value. The NAV depends on the performance of the corpus that the insurance company manages, just as it is for a mutual fund. In case of death of the policyholder, the nominee gets either, the higher of the sum assured and fund value, or, both.