What is ULIP?

Introduction

In this article I will be writing about the ULIP insurance plan. In our previous articles we have learn about the term insurance or life insurance plans and the endowment insurance plans. ULIP is the one kind of insurance plans which is linked to the investment options. Many people prefer to invest on the ULIP plans because it yields better return. I will explore the advantages of the ULIP insurance plans in details. If you like the article, please subscribe to our future articles here.

What is ULIP?

ULIP stands for Unit Linked Insurance Plans. As we know that insurance is for protecting our life from the any uncertain events like death or accident. The purpose of the normal insurance plan is just protecting the life but not ensuring any savings for the future. Many people wanted plan which gives protection also gives the returns for their investment. So, insurance companies come up with the ULIP plan where the premium about is invested in the share market and returns better income on the maturity period.

ULIP and Mutual Funds difference?

In structure both ULIP and Mutual Funds looks similar. But, in objective they are different. Because of the high first-year charges, mutual funds are a better option if you have a five-year horizon. But if you have a horizon of 10 years or more, then ULIPs have an edge. To explain this further a ULIP has high first-year charges towards acquisition (including agents’ commissions). As a result, they find it difficult to outperform mutual funds in the first five years. But in the long-term, ULIP managers have several advantages over mutual fund managers.  Since policyholder premiums come at regular intervals, investments can be planned out more evenly.  Mutual fund managers cannot take a similar long-term view because they have bulk investors who can move money in and out of schemes at short notice.

Summary

In this article I have explained about the ULIP plan and the purpose of the ULIP. In my next article I will be writing about the different ULIP plans and how to choose the better plans amound the many players in the market. Thank you for reading this article!! You can subscribe to our future articles here.

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