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Different Types of ULIP Investments in India

Unit Linked Insurance Plans (ULIPs) are a type of insurance-cum-investment product in India that provide insurance and investment benefits to policyholders. Read ahead to know all about it.

  • 6,404 Views | Updated on: Jan 10, 2024

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.

What is a Unit-Linked Insurance Plan?

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.

Also Read: What is ULIP Plan?

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

Unit Linked Insurance Plans (ULIP) are an innovative and comprehensive insurance product that combines the benefits of insurance and investment in a single plan. ULIPs are popular among investors as they offer a range of investment options that can suit their financial goals and risk appetite.

In India, there are various types of Unit Linked Insurance Plan investments available in the market. Here are some of the popular 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 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.

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 minimum. As a result, they’re a suitable option for risk-averse investors who wish to minimize 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 support a bigger portion of their payments in the financial market. However, non-guaranteed ULIPs, are more volatile.

ULIP types of wealth creation

Based On Life Stage Vs Not Based On Life Stage

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.

Regular Premium Vs Single Premium

Everyone has the ability to pay a premium. 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.

To Make Retirement Plans

Retirement corpus building ULIPs can save you if your regular source of income quits and you’ve reached the end of your working years. There are particular ULIP programs 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.

To Handle Personal or Medical Emergencies

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 the urgent expense if you are in the hospital and require rapid cash.

Wrapping Up

ULIPs are fantastic insurance products that provide coverage and allow you to maximize 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.

    Key takeaways

  • In a ULIP, the premium paid by the policyholder is divided into two parts, i.e., the insurance component and the investment component.
  • Some ULIPs invest in a blend of equities and debt assets to reduce risk.
  • Liquid assets ULIP plans are ideal for reaching short-term financial objectives since they invest in highly liquid money market products.
  • Cash deposits, term deposits, and market funds are all examples of relatively low-risk cash fund vehicles used by some types of ULIP Plans.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

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.

Amit Raje
Reviewed By :
Prasad Pimple

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

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