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How ULIP Works

ULIPs allow you to create wealth for your long-term goals with the added protection of life insurance. Click here to understand how ULIP works and its features.

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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

The primary goal of an insurance plan is to ensure your loved ones’ financial protection and safety in case of circumstances uncalled for. You can choose from a range of schemes based on your life stage and needs, such as pure insurance, savings, children’s education, pension (wealth generation), and so on. The Unit Linked Insurance Plan is one product that may be used as both an insurance and an investment tool (ULIP). When you buy a ULIP plan, a portion of your payment goes towards insurance, while the remainder is allocated in equity or debt funds based on your preferences. You can pick from a variety of plan options, each with a different budget allocation to equities and debt. Let’s take a look at how it works.

How does ULIP work?

When you invest in a Unit Linked Insurance Plan, the chosen insurer collects money from all customers and invests it in funds that they select. The overall sum is partitioned into ‘units’ with a specific face value once the money has been invested. Also, the sum invested is then divided into ‘Units’ for each particular investor.

The Net Asset Value, also commonly known as NAV is the value of each unit at any given time and the effect of changes in the value of the portfolio is represented in the NAV. If you make a partial withdrawal from the cash reserve (according to the policy’s terms and conditions), the corresponding number of units are sold. In the same way, some policy fees are subtracted in the form of the number of units.

Some Features

Allocation

Some ULIP plans let you look into both your current and future investments by allowing you to transfer assets from one fund type to another in a structured manner depending on the type of risk appetite you have. They also enable you to effectively manage your assets in order to maximize the returns on your investment.

Switching

You can convert your current investment from one plan type to another using Unit Linked Insurance Plans. This switching system enables you to shift all of your funds according to your market view and life stage.

You must always start your investing and insurance adventure by determining how much coverage you require. That bit is crucial as it gives you an overview of what your future might look like with your loved ones. It is important to note that the initial five years of the contract will provide no liquidity with respect to the connected insurance products. The policyholder will not be allowed to entirely or partially surrender/withdraw the funds invested in the ULIP plan until the conclusion of the fifth year.

How are ULIPs any different?

Unit Linked Insurance Plans are different from standard financial products as they have many risk-associated factors. The premium paid in the best ULIP plans are vulnerable to a variety of investment risks connected with financial markets, and the NAVs of the units may rise or fall depending on the performance of the fund and the variables influencing the capital market.

Now that you have some basic understanding of how ULIP plans work, you can go ahead and make some comparisons to invest in one that best suits your needs and requirements!

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Kotak Life Time Income Plan

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Features

  • 6 Plan Options
  • Tax benefits ^
  • Higher annuity rates for higher purchase price
  • 4 Annuity Modes

Ref. No. KLI/23-24/E-BB/1052

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