By toufiqlakhani
About Unit-linked life insurance policy - Ulip…!!!!
The overture of Unit linked Insurance Policy has possibly been the single leading novelty in the field of life insurance in the insurance market history!
What's more, understanding among investors in terms of insurance products tends to be inadequate. Today, more than 70 per cent of the new business premium for life insurers comes from Ulips.
ULIP came into play in the 1960s and became very popular in Western Europe and Americas. The reason that is assigned to the widespread popularity of ULIP is because of the transparency and the flexibility which it offers. Unit linked life insurance plan (ULIP) offers you the opportunity to earn market related returns while enjoying the priceless benefits of life insurance.
A ULIP investment is not an ideal investment for the short term investor, because it takes longer to break even due to higher initial expense. You must know that the ULIPS are not designed for short term time horizon and not at all a short term game
I will give insight into the reward of investing your hard earned money into the ULIP insurance plans in details.
How to choose best Insurance policy……..?
Unit link insurance plans (ULIPs) are aggressively sold since its launch. Today more than 200 unit link insurance plans available in market and all of them claim to be the best insurance policy in the market. But the fact is that all insurance plans are not same. The idea of comparing various is very intimidating because comparing insurance policies is like trying to unravel a noodle soup. They are designed to behave as combination of term insurance policies plus mutual funds. We do not recommend buying any insurance plan unless you are fully aware of the terms and why it is advantageous to you.
One reason why insurance has become more complex than required is because of the quality of insurance advice. Insurance advisor play a critical role in selecting a right insurance policy
Get your fundas right once you find out the sum assured of life insurance you want, just get the cheapest insurance policy offered in the market.
Investors, for having made miss-guided investment decisions and advisors for having mis-sold ULIPs and/or failing to adequately educate investors. However this weird process of choosing right ULIP can be made smooth by following few simple steps.
Collect information on ULIPs, the various alternatives available and understand their working.
Things to consider while Investing in an Insurance policy.
1. Cost (charges)
2. Flexibility
3. Liquidity
4. Other Benefits
5. Tax Benefits
Cost (Charges)
Costs involved are a major deciding factor for choosing right ULIP.
If you are keen on making good money through investing in ULIP, it is imperative to know the various charges that policies involve.
These charges, to a greater level, decide the usability and efficiency of a ULIP. Usually after a time span of five years the surrender charges are zero for ULIPs.
Make sure to read the plan's brochure before investing in any ULIP. The cost constitution of unit linked insurance policy makes difference with the returns on your investment.
When you pay a premium, you are given an insurance cover and part of premium is invested in the fund of your choice. In the initial years, a big chunk of the premium goes towards purchasing an insurance cover and remaining premium is invested.
But it is only five years that the real advantage of an Ulip starts flowing in.
If premiums are not paid regularly or if it does no run its entire course ULIP plan becomes too expensive. For this reason finding a good affordable health insurance for your pet is essential
There are some insurance companies who charge 1.5% or less annual fund management fees. In fact, one leading insurance company charges only 0.8% annual fees on all its funds including its equity fund.
In the first year of his ULIP Policy, the insurance company had made an allocation charge of 25 per cent of the premium paid. It indeed is beneficial, although to the insurance company. Mortality charges are the cost that the insurance company charges you to provide insurance cover to you.
ULIP charges low Annual fund management charges of around 1% as compared with 2-3% charged by equity mutual fund thus allowing superior return to the investor in long run. Over a longer time horizon,ULIPs are expected to provide both attractive and positive returns. By Tradition insurance products have been coupled with handsome returns tied together with tax benefits. Ulips are one of the good investment alternative systematic, long-term investment option gaining popularity.
Term insurance policies are usually considered the cheapest but what u get in return is only insurance cover and nothing on maturity.
Make sure you stay invested in a ULIP for a time horizon of not less than 10 years to derive its actual advantage.
Death Benefit
Some unit-linked insurance plan guarantees the higher of the two amounts sum assured and the market value of the premiums, while some guaruntees sum of both sum assured and the market value of the premium.
Flexibility
Each Ulips are distinctly designed products and give many choices to the policyholder.
Flexibility includes, Choosing the amount of insurance cover, Top ups, Switching among various fund options, withdrawals and so on......
Unlike Traditional insurance products in ULIPs an investor has option to choose desired sum assured, which is normally in multiple of the premium amount that will be paid by the investor
Top Ups is the another facility offered by ULIPS that an investor have, ULIPs permit to make and additional lumpsum investment in excess of the regular premiums, however with some restrictions.
ULIPs permits definite number of switches among various fund options available. Some of these switches are free and some are chargeable.
Many Ulips offer facility to withdraw funds after paying premium for three years. Since Ulip are NAV based products you can make partial withdrawal from your funds by reedeming units within certain limits
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