ULIPs- (Systematic Insurance cum Investment Plan)

A ULIP is nothing but a market-linked insurance plan. There is a difference between a ULIP and other insurance plans viz the way in which the premium money is invested. Premium from traditional insurance plan or an endowment plan is invested mainly in risk-free instruments like government securities (Gsecs) and AAA rated corporate paper, while in case of ULIP, the premiums can be invested in stock markets in addition to corporate bonds and/or Gsecs. This option makes ULIPs an attractive investment for an individual. The following few reasons make ULIPs irresistible as an investment option -

Transparency

ULIPs provide a transparent option to customers for planning their various life stage needs through market-led investments as compared to the traditional investment plans.

Insurance cover plus savings

ULIPs serve 2 main purposes - of providing life insurance along with savings at market-linked returns. Hence, ULIPs can be termed as a two-in-one plan in terms of offering an individual the twin benefits of life insurance plus savings. This option is not available in comparable instruments such as mutual fund for instance, that does not offer a life cover.

ULIPs offer a variety of investment options unlike traditional life insurance plans. ULIPs generally come in 3 broad variants:

• Aggressive ULIPs (invest 80%-100% in equities and the balance in debt)

• Balanced ULIPs (invest about 40%-60% in equities)

• Conservative ULIPs (invest up to 20% in equities)

Such allocation of debt/equity varies according to insurance companies. An investor also has the option of choosing various options/funds available according to his risk appetite and return expectation.