Unit Linked Insurance Plans, or ULIP Plans as they are better known, have emerged as a preferred choice of insurance-cum-savings vehicle for many Indians in the last decade. Many investors have invested in ULIPs to meet their various financial goals, be it child education planning, house purchase planning, or retirement planning. Yet, many people have not understood the concept of ULIPs and hence ended up buying wrong product.
So what are ULIPs?
When we talk about insurance as an investment option, ULIPs are the products that suit the profile. ULIP is an insurance policy which provides dual advantage of insurance as well as investment. Here the premium which you pay is divided into parts – one part (small portion) is used to provide insurance and the other part (the larger one) is used to buy units for investment. This enables the buyer to secure some protection for his family in the event of his untimely death and at the same time provides him an opportunity to earn a return on his premium paid. The value of investments alters with the performance of the underlying fund chosen by the investor. Hence, the investment risk is borne by the investor.
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