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In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/492
ULIP plans in India offer a diverse range, including equity, debt, and balanced funds, allowing investors to tailor their investments to their risk appetite and financial goals.
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 organizations 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.
Unit-linked insurance plan (ULIP) is a type of life insurance plan that offers policyholders the dual benefit of insurance coverage and investment opportunities. It is a unique product that offers a wide range of investment options, allowing policyholders to invest in various funds and securities, including stocks, bonds, and mutual funds.
In a ULIP, the premium paid by the policyholder is divided into two parts, i.e., the insurance component and the investment component. The insurance component provides the policyholder with a life cover, while the investment component is invested in various funds, as per the policyholder’s choice. The returns from these investments are then credited to the policyholder’s account, which can be used for various purposes such as education, retirement, or any other long-term financial goals.
ULIPs offer a variety of investment fund options to cater to different risk appetites and investment goals. Here, let us take a look at different types of Unit Linked Insurance Plans based on investment funds.
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.
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.
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.
Some ULIPs invest in a blend of equities and debt assets to reduce risk. The risk is successfully spread 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 offered by pure stock funds.
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 minimum. As a result, they’re a suitable option for risk-averse investors who wish to minimize their risk as much as possible.
Thematic funds focus on specific investment themes or sectors such as technology, healthcare, or renewable energy. These funds capitalize on emerging trends or industries poised for growth, offering the potential for high returns. Thematic ULIPs allow investors to align their investments with their convictions or capitalize on niche opportunities within the market.
ULIPs offer flexibility and customization, allowing investors to align their investment strategy with their wealth creation goals and risk appetite. The different types of ULIP plans based on wealth creation objectives are.
Regular premium plans divide and spread the premium payments over regular intervals, while single premium plans call for a single premium payment to be made at the start of the plan.
As you get older, these programs, which are your financial assistants, shift the investments among various risk levels. The plan is aware that risk appetite is strongest in youth and that priorities vary over time. Investments will alternate between stock and debt instruments in varying ratios and at various times.
Guaranteed ULIPs provide investors with a minimum guaranteed return on their investment, ensuring a level of financial security. Non-guaranteed ULIPs do not offer a minimum guaranteed return but instead, provide the opportunity to earn potentially higher returns linked to the performance of the underlying investment funds. These plans are ideal for investors willing to take on higher risk in exchange for the potential of greater wealth accumulation over the long term.
One of the critical aspects of ULIPs is the death benefit they offer, which ensures that the policyholder’s loved ones are financially protected in case of an unfortunate event. Different types of ULIP plans based on their death benefits are.
Type 1 ULIPs, also known as pure protection plans, offer a death benefit equal to the higher of the sum assured or the fund value to the nominee in case of the policyholder’s demise during the policy term. These plans prioritize providing a financial safety net to the policyholder’s dependents, ensuring that they receive a substantial sum to cover their financial needs in the absence of the breadwinner.
Type 2 ULIPs, also known as comprehensive plans, provide a death benefit equal to the sum assured along with the fund value to the nominee in case of the policyholder’s demise during the policy term. These plans offer both a guaranteed sum and the potential for additional returns linked to the performance of the underlying investment funds.
One of the significant advantages of ULIPs is their ability to secure your child’s future by simultaneously offering financial protection and investment growth potential. ULIPs can be effectively utilized to secure your child’s future in many ways.
ULIPs provide a life insurance component, ensuring that in the unfortunate event of the policyholder’s demise, a lump sum amount is paid out to the nominee. By purchasing a ULIP, you can safeguard your child’s financial future, ensuring that they have the necessary resources to pursue their dreams and aspirations even in your absence. This financial safety net can cover various expenses, including education, healthcare, and other essential needs.
ULIPs offer the flexibility to invest in a diverse range of investment funds, including equity, debt, and balanced funds. By allocating funds strategically based on your risk appetite and investment goals, you can potentially grow your wealth over the long term. Investing in ULIPs early in your child’s life allows you to benefit from the power of compounding, wherein returns earned on your investments are reinvested to generate additional returns, leading to accelerated wealth accumulation.
When investing in ULIPs for your child’s future, it is essential to identify specific financial goals, such as funding their education, marriage, or providing a financial cushion for their entrepreneurial endeavors. By aligning your investment strategy with these goals, you can tailor your ULIP portfolio to meet your child’s future financial needs effectively. Regularly review and adjust your investment strategy to ensure that you stay on track to achieve these objectives.
ULIPs offer flexibility and control over your investment portfolio, allowing you to switch between different investment funds based on market conditions, risk appetite, and changing financial goals. This flexibility enables you to adapt your investment strategy to evolving market dynamics and optimize returns while mitigating risks. Additionally, ULIPs provide the option to make partial withdrawals or top-up premiums, providing liquidity and addressing any unforeseen financial requirements.
Retirement corpus building ULIPs can save you if your regular source of income quits and you’ve reached the end of your working years. Particular ULIP programs are created to care for you in your later years. After the plan expires, they offer regular payouts, and you will get sufficient funds to live comfortably.
Occasionally, there are significant expenses that we cannot avoid., Emergencies like medical problems, accidents, legal costs, settlement amounts, debt, etc., can truly hit you hard when you least expect them. Some programs assist you in creating a corpus that you can utilize in place of a health insurance policy. The plan enables you to partially withdraw from your greater maturity corpus to cover urgent expense if you are in the hospital and require rapid cash.
ULIPs in India come in various types, each catering to different investment objectives, risk profiles, and financial goals. Whether investors seek wealth creation, financial protection, retirement planning, or securing their child’s future, there’s a ULIP plan tailored to meet their specific requirements. Understanding the features, benefits, and risks associated with each unit-linked insurance plan is essential for making informed investment decisions and achieving long-term financial objectives.
1
ULIP stands for Unit Linked Insurance Plan. It is an investment-cum-insurance product that offers both life insurance coverage and investment opportunities. There are various types of ULIPs available, including equity ULIPs, debt ULIPs, balanced ULIPs, child ULIPs, pension ULIPs, and ULIPs with guaranteed returns.
2
There are several types of ULIP plans available in the market, each designed to cater to different financial goals and risk preferences. Some common types of ULIP plans include equity ULIPs, debt ULIPs, balanced ULIPs, child ULIPs, pension ULIPs, and ULIPs with guaranteed returns.
3
In a Type 2 ULIP, also known as comprehensive ULIP, the death benefit is equal to the sum assured along with the fund value. This means that in the unfortunate event of the policyholder’s demise during the policy term, the nominee receives a lump sum amount equal to the sum assured plus the fund value accumulated till that point.
4
Type 1 ULIP plans, also known as pure protection plans, offer a death benefit equal to the higher of the sum assured or the fund value to the nominee in case of the policyholder’s demise during the policy term. On the other hand, Type 2 ULIP plans, also known as comprehensive plans, provide a death benefit equal to the sum assured along with the fund value to the nominee.
5
The five charges associated with ULIPs are:
6
Some benefits of ULIPs include:
1. What are the Advantages and Disadvantages of ULIP?
2. How to Calculate Your ULIP Returns?
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/521
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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