Unit-linked insurance plans, ULIPs, are distinct from the more familiar ‘with profits' policies sold for decades by the Life Insurance Corporation. ‘With profits' policies are called so because investment gains (profits) are distributed to policyholders in the form of a bonus announced every year. ULIPs also serve the same function of providing insurance protection against death and provision of long-term savings, but they are structured differently.
‘With profits' policies, the insurance company credits the premium to a common pool called the ‘life fund,' after setting aside funds for the risk premium on life insurance and management expenses. Every year, the insurer calculates how much has to be paid to settle death and maturity claims. The surplus in the life fund left after meeting these liabilities is credited to policyholders' accounts in the form of a bonus.
In a ULIP too, the insurer deducts charges towards life insurance (mortality charges), administration charges and fund management charges.
The rest of the premium is used to invest in a fund that invests money in stocks or bonds. The policyholder's share in the fund is represented by the number of units.
ULIPs are dynamic plans and are flexible by nature and hence allow for changes and high degree of customization in the plan as opposed to most of the financial plans which once purchased cannot be modified. It is because of embedded characteristics of transparency, flexibility, liquidity & goal based savings that ULIPs have emerged as preferred investment option today.
The following subsections will not only help you to understand various attributes of ULIPs but also guide you to use these features to manage your policy.
ULIPs address and overcome several concerns that you have as an investor about life insurance like liquidity, flexibility, and transparency or the lack thereof. No wonder ULIPs are termed as one of the most significant innovations of the recent times introduced by the insurers.
For more information on Best ULIP plans you can visit our website http://www.insuremegenie.com/investment/investment.html
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