ULIPs And Frequently Asked Questions About Them

The term "unit-linked insurance plan" (ULIP) refers to an insurance policy that is linked to a specific asset. ULIP is a type of life insurance that offers both financial protection and investment freedom in the event of unforeseen circumstances such as death or accident.

The premium paid for a ULIP is invested in the fund(s) of the policyholder's choice at a certain rate. The performance of the fund in the capital market determines the returns on a ULIP. Investors in ULIPs can choose from a variety of schemes, including diversified equities funds, balanced funds, and debt funds, among others.

It's vital to keep in mind that the investor normally bears the investment risk in a ULIP. During the duration of the plan, expenses such as life insurance, fund management, and so on are withdrawn from the fund.

ULIPs And Frequently Asked Questions About Them

Given this recognition of the importance of knowledge and information, here are the answers to all of your burning ULIP questions:

1. Is It Possible To Cancel My Insurance Policy Before It Expires?

By submitting a surrender request, you can cancel your insurance. Surrender fees differ per product. You will get the Surrender Value when you surrender your policy, which is equal to the value of your fund on the surrender date. Before the five-year lock-in period, you will not receive any payment. While you can cancel your policy before it expires, it is recommended that you invest for at least 10 years to reap the full benefits of your policy.

2. What Does It Mean To Be Redeemed?

Encashing the units at the company's current NAV is known as redemption. This is true for partial withdrawals, switches, maturities, surrenders, settlement options, and death benefit payments.

3. What Exactly Is A Switch?

ULIP funds give you a wide range of risk-adjusted funds to choose from. You can invest in equity funds, which have a higher risk profile if you want to maximize capital appreciation; bonds and other fixed-income instruments, which have a lower risk profile; cash funds or money-market instruments, which have the highest liquidity and lowest risk profile; or balanced funds, which contain components of all of these, making it a medium-risk hybrid instrument. In the end, it comes down to your risk tolerance and investment goals.

4. Are ULIP Investment Returns Guaranteed?

The fund alternatives in ULIPs are subject to capital market fluctuations and dangers. As a result, if you want assured returns, you should invest in debt and fixed-income bonds rather than equity, which is more volatile.

When it comes to choosing the funds for your ULIPs, knowing what you're getting into makes the selection easier.

5. What Should Be Double-Checked Prior To Signing The Proposal?

It is necessary to double-check the approved sales brochure for

• Payment on premature surrender includes any expenditures that are deductible under the policy.
• Advantages and features
• Exclusions and limitations
• Lapse and its ramifications
• Other information.

6. What Percentage Of The Premium Is Used To Buy Units?

The entire premium payment is not used to purchase units.

Assurers distribute units based on the fraction of the premium that remains after various charges, levies, and deductions. However, the proportion of premium used to acquire units varies by product.

Because the charges are removed from the premium collected first and the remaining amount is utilized for unit allocation, the total monetary worth of the units allocated is invariably less than the amount of premium paid.

7. Is It Possible To Get A Refund Of Premiums If You Are Unhappy With Your Coverage After You Have Purchased It?

Within 15 days of receiving the policy paperwork, commonly known as the Free Look-in Period, the policyholder can request a refund of premiums if he disagrees with the policy's terms and conditions. The fund value, including costs, will be repaid to the policyholder after deductions for medical examination, stamp duty, and proportionate risk premium for the term of coverage.

Conclusion

A unit-linked insurance plan or ULIP is a type of life insurance that offers flexible investment options as well as financial protection in the event of death, disability, or other unforeseen occurrences. The policyholder can choose among equity, debt, or balanced funds, as well as life insurance coverage, according to the ULIP insurance definition. 

You may also like to read - Do You Want To Invest And Insure? Buy A ULIP!

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.