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Has the recent performance of the stock market left you with a regretful feeling for not being a part of the soaring market? Do you have a flavour for the market but also want some wise investment at the same time? If yes, then Unit Linked Insurance Plans (ULIP) is the answer.
ULIPs also known as investment plans is a perfect package that comes with insurance coverage and investment options. So that leaves you with the opportunity of investing in equities. But you do need to keep in mind that the investments in stocks are subject to the vagaries of the market. The volatility in equity markets can keep you uneasy and disturbed since you wouldn't like to see your reserve being affected. You need to know your risk appetite and then make a choice accordingly by choosing an appropriate fund. ULIPs offer you the option to invest in anyone of the four funds. If you are not inclined to take a lot of risk then you can certainly invest in secured or balanced fund.
However the best part of having an investment plan is that you can switch from one fund to another, which you find less risky. For example if Mr. Patil has invested in growth fund and has found that the investment in this particular fund is going to fall then he does have the choice of switching over to another fund which he finds safer, it could be a growth, balanced or any other fund. For example if you choose LIC's 'Jeevan Plus', the policyholder has to choose any one from the four funds, which are Bond, Secured, Balanced and Growth funds. Within a given policy year, four switches are allowed free of charge. After the completion of one year, Rs.100 is charged for per switching of the fund.
Two factors considered responsible for the advent of ULIPs are firstly- the entry of private insurance companies in the insurance sector and the second factor being the decline of assured returns on endowment plans. Private players proved their innovation with the introduction of ULIPs. The performance of these plans has also been quite impressive with the recent figures revealing that the private insurers have acquired a business of Rs 4,768 crore whereas LIC managed to obtain Rs 2,758.6 crore.
The performance of stock market especially in the last few months has made ULIPS all the more popular. It is the only option that lets you to be a part of the stock market and at the same time offers insurance cover. It is like the best of two things clubbed into one. And honestly things couldn't get any better when we bring its other features into the limelight.
An innovative aspect of ULIPs is the 'top-up' facility. A top-up is a one-time additional investment that is paid apart from the annual premium of the policy. This feature works well when you have a surplus that you are looking to invest in a market-linked avenue. ULIPs also have the facility that allows you to skip premiums if you have paid your premiums regularly for the first three years. For instance, if you have paid your premiums dutifully for the first three years then you have missed out the payment of fourth year's premium then the insurance company will make the necessary adjustments from your investment surplus and will make sure that the policy remains active. But it is always advisable to pay the premiums regularly to avoid troubles. Such facilities are not available with any other policy. This makes it a differentiating factor when compared to policies like endowment, term or money back policies.
Another important feature is that ULIPs disclose their portfolios regularly. This gives you an idea of how the money is being managed. Another important aspect is its 'liquidity' factor. Since ULIP investments are NAV-based it is possible to withdraw a portion of your investments before maturity. It is possible only after the completion of the lock-in period. Such facility is not available with in a traditional endowment policy. With ULIPs one can also avail the tax benefits which is offered under Section 80C. This is subject to a maximum limit of Rs 1,00,000.
Investment plans are particularly for those looking for security with an inclination for the share market. To make it easier to choose, LIC offers 'Future Plus' and 'Jeevan Plus' which are unit linked plans.
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