An Overview on Ulip, Its Benefits and Selecting the Right Ulip Plan

About ULIP

This article is an initiative from Bajaj Allianz to create better understanding of ULIPs and its benefits so that investors can avail maximum returns from their investments.

ULIP stands for Unit Linked Insurance Policy (ULIP). Unit Linked Fund is a collection of the premiums paid by the policy holders which is invested in a portfolio of assets to achieve the fund(s) objective. The price of each unit in a fund depends on how the investments in the fund would perform. The fund is managed by the insurance companies (Bajaj Allianz provides the Wheel Of Life Portfolio Strategy for those who find investing and insuring as Greek and Latin. Our investment officers will select and invest in the appropriate funds to balance and safeguard your investment.

ULIPs are a category of goal-based financial solutions that combine the safety of insurance protection with wealth creation opportunities. In ULIPs, a part of the investment goes towards providing your life cover. The residual portion is invested in a fund which in turn invests in stocks or bonds. The value of investments alters with the performance of the underlying fund opted by you. (

Simply put, ULIPs are structured such that the protection element and the savings element can be distinguished and hence managed according to your specific needs, offering unprecedented flexibility and transparency.

ULIP provides multiple benefits to the customers. They include:

· Life Protection

· Investment and Savings

· Flexibility

· Adjustable Life Cover

· Investment Options

· Transparency

· Options to take additional cover against

· Death due to accident

· Disability

· Critical Illness

· Surgeries

· Liquidity

· Tax Planning

5 reasons why ULIP works best for people aged 25-40 years

  • These are long-term products that need an investment horizon of at least 10 years to yield maximum benefits. It is a good investment option after life insurance.
  • They combine basic insurance with mutual fund. It could also work as entry-level mutual fund.
  • It allows you to switch across funds at lowest cost Low-cost mutual fund in the long term.
  • Annual fund management charges in ULIP are around 1{7bd3c7ad8bdfca6261de5ca927cd789e17dbb7ab504f10fcfc6fb045f62ae8d5} compared with 2-3{7bd3c7ad8bdfca6261de5ca927cd789e17dbb7ab504f10fcfc6fb045f62ae8d5} charged by equity mutual fund thus allowing liquidity to the investor.
  • All or part of corpus can be withdrawn after 3 year.

Important things to remember before investing in a ULIP

1. Develop a clear understanding of the concept of ULIPs

Studying the concept of ULIP thoroughly before investing is very essential. This will help you make informed critical decisions. The information on ULIPs is easily available on Financial Websites, Newspapers and sales literature circulated by insurance companies.

2. How much risk are you willing to take?

Choose the plan that is best suited for you in terms of allocation of money between equity and debt instruments. Your risk appetite is the deciding factor in your choice of the plan.

Therefore, for someone with a high risk appetite, a dynamic investment option with higher allocation to equity component can work. But be extremely careful with your plan. Choosing a plan with greater allocation to Equity with the objective of bigger returns can work against you.

3. Make a detailed study of the different ULIP products being offered

Compare various Insurance products on parameters like expenses and premium payments. For example, a knowhow on premium payments will give an understanding of the minimum outlay as ULIPs function on premium payments as compared to the sum assured in conventional insurance products.

Also it is advisable to find out about options to increase the premium amounts and free switches (i.e. change of asset allocation of your ULIP account from one investment plan to another)

4. Is your ULIP plan offering a minimum guarantee?

Protecting the investment’s downside can be a huge advantage in a market-linked product. Find out if your ULIP plan offers a minimum guarantee and what is the costing involved for the facility.

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