Unit Linked Insurance Plan (ULIP)


Unit Linked Insurance Plan (ULIP)

ULIP is an abbreviation for Unit Linked Insurance Policy. A ULIP is a life insurance policy which provides a combination of risk cover and investment. The dynamics of the capital market have a direct bearing on the performance of the ULIPs. In a ULIP policy, the investment risk is generally borne by the investor

Investment returns from ULIP may not be guaranteed. In unit linked products/policies, the investment risk in investment portfolio is borne by the policy holder. Depending upon the performance of the unit linked fund/s chosen; the policy holder may achieve gains or losses on his/her investments. Also note that the past returns of a fund are not necessarily indicative of the future performance of the fund

The allocated (invested) portions of the premiums after deducting for all the charges and premium for risk cover under all policies in a particular fund as chosen by the policy holders are pooled together to form a Unit fund.

Different Types of ULIP

Most insurers offer a wide range of funds to suit one's investment objectives, risk profile and time horizons. Different funds have different risk profiles. The potential for returns also varies from fund to fund. The following are some of the common types of funds available along with an indication of their risk characteristics.
1) Equity Funds (Medium to High risk) - Primarily invested in company stocks with the general aim of capital appreciation
2) Income, Fixed Interest and Bond Funds (Medium risk) - Invested in corporate bonds, government securities and other fixed income instruments
3) Cash Funds (Low risk) - Sometimes known as Money Market Funds — invested in cash, bank deposits and money market instruments
4) Balanced Funds (Medium risk) - Combining equity investment with fixed interest instruments

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