Types of ULIP investments in India
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Types of ULIP Investments in India

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  • 26th Apr 2022
  • 2,642

Types of ULIP Investments in India

Unit-Linked Insurance Plan (ULIP) is a type of life insurance that invests your money over time to create wealth for the future. The investment is funded using high-grade market securities, including stock and debt. As a consequence, ULIPs are an excellent addition to your investment portfolio.

Due to fund alternatives that provide steady returns, low levels of risk, or both, ULIP plans are becoming more popular. Many insurance banks, companies, and financial organisations offer these plans in India, allowing policy purchasers to select from various alternatives. Consequently, your money will generate significant returns and life insurance cover for your loved ones during the vesting period.

ULIP is a life insurance policy with investment growth tied to the market. A percentage of your money goes into the policy premium, and the rest is put into high-quality investments. There are different types of ULIP plans in India:

Types of Unit Linked Insurance Plan (ULIP) Investments in India

Equity

The fund from the investors is used to buy equity shares in one or more firms. Equity investments are significantly riskier since they are directly linked to financial market movements. However, on the other side, the potential for expansion is greater. As a result, ULIPs are appropriate for risk-averse individuals with a high-risk tolerance.

Debt

The investment of funds in debt instruments such as corporate bonds, government bonds and securities, debentures, and fixed-income bonds are various ULIP plans. While these instruments have a medium to low-risk profile, they also have a moderate return profile.

Balanced funds

Some ULIPs invest in a blend of equities and debt assets to reduce risk. The risk is successfully spread out among high-risk and low-risk investment alternatives by assigning one portion of the money to equities and the other to fixed-income debt securities. As an outcome, the returns provided by balanced funds are much more consistent and less volatile than those provided by pure stock funds.

Liquid assets

Liquid assets ULIP plans are ideal for reaching short-term financial objectives since they invest in highly liquid, money market products, including certificates of deposit (CD), treasury bills, and call money. Unlike other ULIPs, these liquid funds have a shorter maturity time, usually weeks to months. In addition, most of these ULIP investments have high credit ratings, making them a secure investment option for those with low-risk tolerance.

Funds in cash

Cash deposits, term deposits, and market funds are all examples of relatively low-risk cash fund vehicles used by some types of ULIP Plans. While the earnings on these ULIPs are the lowest, the risk factor is also the lowest. As a result, they’re a suitable option for risk-averse investors who wish to minimise their risk as much as possible.

Guaranteed and non-guaranteed ULIPs

Guaranteed ULIPs are designed to protect your money. They limit their exposure to market risk by investing just a tiny portion of the charge in shares. Non-guaranteed ULIPs, are meant to help investors build wealth, allowing them to invest a bigger portion of their payments in the financial market. However, non-guaranteed ULIPs, are more volatile.

ULIPs are fantastic insurance products that provide coverage and allow you to maximise your investments over time. You can purchase different types of ULIP plans to meet various needs. Such plans not only assist you in ensuring that your children receive a high-quality education but they also assist you in creating a corpus so that you may live a secure and comfortable life after retirement. ULIP is a fantastic instrument for folks who wish to protect themselves while increasing their funds. You may also select the funds you want to put your money into based on your future needs and financial capabilities.

- A Consumer Education Initiative series by Kotak Life

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