10 ULIP Terminologies You Should Know About
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A ULIP combines money and protection into one ticket. The main advantages of ULIP insurance are flexibility and financial stability. Furthermore, ULIP investments may generate large returns to assist policyholders in achieving their life goals, such as travel, hobby pursuits, retirement, and so on. The combined benefits of investment and insurance can assist you in achieving your family's objectives.
Before investing in a ULIP, it's important to understand the terms. Studying the ULIP terms can assist you in fully comprehending the plan.
10 ULIP Terminologies You Should Know About
To assist you to obtain a better grasp of ULIPs, below are a few regularly used terms:
1. Sum Assured
Upon that policyholder's mortality, the policyholder's nominees are entitled to a certain amount. The sum promised refers to this amount. The money assured to the beneficiaries is guaranteed by a ULIP deposit. As a ULIP purchaser, you must ensure that the money assured is strong enough to support your dependents in the event of your death.
2. Fund Value
A major amount of the premium you pay for a ULIP goes toward fund investments. Over time, the investments will likewise expand. The fund value is the current total worth of all invested funds. Combine the number of units you possess by the Net Asset Worth (NAV), or the monetary value of each unit, to get the fund's value.
3. Net Asset Value (NAV)
Net Asset Worth (NAV) refers to the value of a single unit of your investment in a ULIP. The number of outstanding units divides an investment fund, which is a pool of investments from multiple investors (minus any liabilities). As a result, a fund's NAV equals the price of a single unit.
4. Premium
As a policyholder, you must pay the premium in order for the insurance to continue to exist. Depending on your preferences, you can choose the duration of the premium payment. As an investor, you have the option of paying premiums monthly, quarterly, half-yearly, or annually, depending on the mode you choose when you invest. If you don't pay your premiums on time, your ULIP may lapse. As a result, it's critical to pay your premiums on time so that you can get the most out of your investment in order to reach your Life Goals.
5. Death Benefit
The death benefit is the entire sum paid by the insurance company to the beneficiary or nominee in the event of the policyholder's untimely death. The sum assured or the fund value, whichever is greater, can be used. What your recipient receives is determined by the plan you choose. The death benefit can be received as a lump sum or in monthly installments by the nominees.
6. Maturity Benefit
When a policy's tenure expires, the policyholder is offered a maturity benefit. Section 10 (10D) of the Income Tax Act 1961 allows you to receive a tax-free maturity amount, subject to the provisions set forth therein.
7. Riders
Additional services supplied by insurance companies are known as riders or add-ons. These add to the overall value of the policy. Critical sickness rider, premium waiver rider, accidental cover, and so on are the most frequent riders available. However, depending on the company, these riders may differ.
8. Lock-In Period
A lock-in period is a period of time during which you are unable to withdraw your funds. When a policyholder surrenders a ULIP before the lock-in period expires, the fund value is switched to a discontinuation fund. Once the lock-in term is finished, the policyholder can withdraw the money. A 5-year lock-in period applies to ULIPs.
9. Switching Option
An individual can invest in many fund selections at the same time with a ULIP. Policyholders, on the other hand, have the option of switching between these ULIP funds. The amount of switches you are permitted to use is usually determined by the type of plan you select.
10. ULIP Returns
The efficacy of ULIP insurance is determined by supply and demand as much as the assets you choose. To preserve one's gains, one must remain interested for the long term.
Conclusion
Unit Linked Insurance Package (ULIP) seems to be the real identity of a number of co-life insurance entitled Investment-Linked Insurance Plan. A ULIP is a mixed life bancassurance plan. You should contribute monthly premiums as a policyholder, a portion of which is utilized to provide insurance coverage. The rest is pooled with assets from some of the other subscribers and then invested in credit derivatives (stocks and bonds) in an effectively integrate fashion. You may protect me from economic catastrophe while also raising the value per share by buying a ULIP.
Also read- Partial Withdrawals Under ULIPs - Everything You Need To Know
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
