What are ULIPs and their Types?
Close
Close

Buy a life insurance plan in a few clicks

Now you can buy life insurance plans completely online right here.

  • Icon for Kotak Preferred e-Term Plan

    Kotak e-Term Plan

    Kotak e-Term Plan is a pure term plan that provides a high level of protection to your loved ones in your absence.

  • Kotak E-Invest Plan

    Kotak e-Invest is a comprehensive Unit Linked Life Insurance Plan that can be customized as per your goals and needs - be it protection; investment; financial security for child or retirement planning.

  • Icon for Kotak Guaranteed Savings Plan

    Kotak Guaranteed Savings Plan

    Kotak Guaranteed Savings Plan is a savings and protection plan that helps you achieve long-term financial goals and insurance cover against any eventuality.

  • Icon for Kotak Preferred e-Term Plan

    Kotak Lifetime Income Plan

    Kotak Lifetime Income Plan gives you the assurance of your income continuing throughout your life and in your absence throughout the lifetime of your spouse!

  • Icon for Kotak Preferred e-Term Plan

    Kotak Health Shield

    The Kotak Health Shield Plan helps secure your finances in times of sudden medical expenses related to illness such as Cardiac, Liver, Neuro and Cancer (all early and major stages of illness /conditions of Cancer); along with offering protection for Personal Accident - in case of accidental death or disability.

Close

Get a Call

Enter your contact details below and we will get in touch with you at the earliest.

  • Select your Query

Thank you

Our representative will get in touch with you at the earliest.

Back

What are ULIPs and their Types?

View Plans
  • 2nd Mar 2022
  • 116

What are ULIPs and their Types?

A Unit-Linked Investment Plan, commonly called ULIP, is a great investment option since it mixes insurance and investment. A part of the premium amount provides you with insurance coverage, while the remainder is invested in the stock market. Because a portion of the premium is constantly invested in the stock markets over time, the potential for returns is substantially higher than with other investments.

There are different types of ULIPs in India to suit a variety of financial goals and risk profiles. In general, ULIP plans are categorized according to the types of funds in which your premium is invested or their ability to build wealth.

The most popular types of ULIPs in India are briefly described here:

Types of Unit-Linked Insurance Plans - Based on Types of Funds & Wealth Creation

Based on the types of funds

1. Equity

Investors’ money is used to buy equity shares. Since investments in equity are directly linked to financial market changes, they prove to be highly risky. However, the potential for expansion is comparatively larger. Therefore, ULIP plans that invest in equity are appropriate for risk-friendly investors with a high-risk tolerance.

2. Debt

Debentures, corporate or government bonds and securities, and fixed income bonds are among the debt instruments in which the funds are invested. Though these instruments have a medium to low-risk profile, they also include a moderate return profile.

3. Liquid Funds

These ULIP plans are ideal for reaching short-term financial goals since they invest in highly liquid money market products. These funds have a shorter maturity period (from weeks to months). Most of these ULIP investments have high credit ratings, making them a safe investment option for those with a low-risk tolerance profile.

4. Balanced Funds

Some ULIP plans invest in a combination of equities and debt assets to reduce risk. The risk is effectively spread across high-risk and low-risk investment avenues by allocating a part of the amount to equity and the other part to fixed-income debt instruments.

5. Cash Funds

These funds are invested in very low-risk cash fund instruments. While the profits are the lowest of all the available possibilities, the risk is also the smallest, making them an excellent alternative for risk-averse investors who aim to reduce risk as much as possible.

Based on wealth creation

1. Single premium and regular premium ULIPs

The former requires only a single premium payment at the time of purchase. On the other hand, the latter permits you to pay premiums regularly throughout the plan’s life, from purchase through maturity.

2. ULIPs for different stages of life

These are based on the premise that the risk-taking ability of investors decreases with their age. Therefore, a portion of the premium paid is invested in equity securities, while the rest of the amount is invested in debt instruments.

3. ULIPs with and without guarantees

Guaranteed ULIPs are concerned with capital preservation. By investing a small amount of the premium in equities, they restrict the exposure to market risk. However, non-guaranteed ULIPs are designed to maximize wealth creation by enabling an investor to invest a larger amount of their premium in the financial market. As a result, non-guaranteed ULIPs have higher returns, but they are more volatile.

These categorizations convey that you can pick a ULIP plan that meets your risk tolerance and long-term financial objectives. In addition, you can invest in a ULIP plan, which allows you to pick from various funds with varied risk and reward formulae. As a result, make informed decisions and take advantage of market fluctuations.

- A Consumer Education Initiative series by Kotak Life

Also read

    • 26th Aug 2021
    • 984

    Tips to invest your voluntary retirement scheme money

    Opting for premature retirement & wondering how to make the most of your Voluntary Retirement Scheme? Here are the top 5 options that can help you fin...

    Read more
    • 28th Feb 2022
    • 251

    What is Lock-In Period in ULIPs?

    The ULIP lock-in period refers to the time period during which you are unable to withdraw your investment. Click here to get more clarity over the loc...

    Read more
    • 22nd Dec 2021
    • 370

    6 Signs That You Are Not Financially Ready For An Early Retirement

    Choosing to retire early without proper planning can make you regret your decision later on. Here are 6 signs which signify that you are not yet ready...

    Read more

Related Plans

  • Kotak Term Plan

    Kotak Term Plan

    The Kotak Term Plan is a pure risk cover plan and an economical way of providing an adequate level of financial protection.

    Know more
  • Kotak Sampoorn Bima Micro-Insurance Plan

    Kotak Sampoorn Bima Micro-Insurance Plan

    Kotak Sampoorn Bima Micro Insurance Plan is a single premium plan with fixed term of 5 years to cater to the needs of low-income customers.

    Know more
  • Kotak Raksha Group Micro Insurance Plan

    Kotak Raksha Group Micro Insurance Plan

    Kotak Raksha Group Micro Insurance Plan is a protection oriented plan that aims to cover the socially and economically weaker sections of the society....

    Know more