Among various financial instruments used for investments, you must have come across one common name: ULIP. ULIP is a type of life insurance policy that provides you with a dual benefit: investment and insurance. It has gained popularity among many investors due to the benefits provided in single policy. If you’re planning on investing in a ULIP plan and want to understand what are the different types of plans that you can get; read on to know more about ULIPs and understand which plan might suit you.
What is ULIP?
As mentioned earlier, ULIP or unit linked insurance policy is a type of life insurance policy in which you get the benefits of investment and life insurance cover. Investments done in a ULIP plan are done in equity and debt funds. A part of the premium paid for the policy is used to invest in the funds based on what your risk appetite is and what your life goal is. You could invest in either a single fund or both the funds. The other part of the premium is used in providing life insurance cover for your loved ones. You get to enjoy various tax benefits with the help of a ULIP.
What are the types of ULIP plans?
When you want to invest in ULIPs, you will come across different types of plans. These plans suit different requirements and provide different benefits to the investor. Listed below are some of the types of ULIP plans:
- Regular/Single Premium
When you plan on investing in a ULIP, you will come across two different types of premium payment methods. The first method is the regular payment method. In this method, you have the option of paying the premium on a monthly basis, quarterly basis, or yearly basis. This kind of premium payment option is suitable for those who can only pay a certain amount of money owing to other personal expenses. The second type of premium payment option that you get in a ULIP is the single premium payment method. Here, you must make a one-time premium payment, which will be a lump sum amount. You should only opt for this payment method if you have the money to make a onetime payment.
As you are aware, ULIPs provide benefits for those who invest for a long term. Based on what your expectation is from the policy, you could either opt for a guaranteed policy or non-guaranteed policy. In a guaranteed policy, your returns are safeguarded from different types of market risks. Therefore, the investments are made mostly in low-risk-factor funds. On the other hand, in a non-guaranteed policy, your money is invested mostly in funds with higher risk factor. In this type of policy, you have the option of controlling how much you want to invest in and what shall be the duration of those investments in the particular funds.
- Life-staged/non-life staged
The investments that you do in a ULIP policy are based on what your risk appetite is. Compared to your risk appetite in the beginning of the policy, there might be a change over a period of time. At different life stages, your risk appetite and your requirements will keep changing. Based on that, you could opt to invest in a life-staged policy. Investments will be varied to give you a steady source of income with lower exposure to risk. On the other hand, in a non-life staged policy, the investments will not be varied at different stages of life, and they will stay the way they are.
- Based on personal requirements
At different stages of life, you will have different expenses to take care of. For example, if you are planning a major medical procedure; then the investments in your policy will be done in such a manner that you will get to make partial withdrawals of an amount sufficient enough to take care of those medical expenses. If your goal is retirement planning; then a certain amount from your investment will get credited into a bank account to take care of your personal expenses. This pay out could be from time to time
As you can see these are some of the ULIP plan types that you could choose to invest in. If you want to know more about these plans and other ULIP benefits, you can get in touch with your insurance advisor.