Essential Features Of ULIP Plans In India

ULIP plan features are more than we can count but ULIPs are best suitable to those persons who are planning for a long-term investment along with a good risk appetite. The longer the funds stay invested, the higher would be their returns. Therefore it is always suggested to go for ULIPs only if a person has a specific long-term goal to achieve.

The insurers invest this fund in shares, debt funds or in a balanced mix of both, as per the interests of the policyholders. The insurer divides the total fund into various units with a specific value attached to each of them. The number of units a person gets depends on the premium paid by him/her. The returns earned by this policy depend on the market performance of the funds invested.

What is the ULIP Plan?

Unit Linked Insurance Plans or ULIPs are hybrid policies that enable an individual to allocate money for their life coverage along with long-term investment in the capital market. The premium paid towards the ULIP plans is bifurcated into two parts- the smaller portion is allocated to provide the life insurance coverage of the policyholder whereas the larger portion is set aside for investment. The insurer pools the premium paid by different policyholders and forms a single large fund.

Features Of Unit-Linked Insurance Plans ( ULIPs)

There are various features of the ULIP plans, some of which are explained in brief here:

1. Selection Of Investment 

ULIPs offer you the freedom to choose your investment channels according to your risk appetite. Investment in equity funds requires high risk while investing in debt funds is conservative. According to the risk appetite of the investor, he/she can choose to invest in shares or debt funds or enjoy the best of both by investing in balanced funds. 

2. Lock-in Period

The funds invested in the ULIPs remain locked for a compulsory period of 5 years. During this period, the policyholder cannot withdraw any amount from the funds. Also, he is not permitted to switch or surrender the funds during this period.

3. Fund Switch 

If the performance of your selected funds isn't satisfactory or if you also anticipate a change in the market conditions in future, you always have the option to switch from one type of funds to another within the same plan. Hence, you can shift to debt funds during market slowdowns and switch to equity funds during upswings. This fund switch is possible after the lock-in period of 5 years. 

4. Partial Withdrawal 

You also have an opportunity to partly withdraw funds to meet any financial emergencies after the 5 year lock-in period. The number of withdrawals and the interval between each withdrawal is determined by the insurance company. 

5. Top-Ups

One can invest a surplus amount in addition to the base premium to buy additional units and generate high returns.

6. Mode Of Payment

A policyholder can choose a particular method of premium payment from yearly, half-yearly, quarterly or monthly, according to his/ her convenience. 

7. Charges 

The ULIPs charge the policyholder under various heads viz., Fund Management Charge, Administration Charge, Switch Charge, Rider Charges etc.

Conclusion

The choice of Policy is completely personal and is influenced by various factors such as the income of the policyholder, circumstances, long-term goals etc. Always check multiple plans, compare their details and then only invest in the one that suits your needs.

Also Read: 

How Safe Is It To Invest In A ULIP?

10 Most Frequently Asked Questions for ULIP

Disclaimer: This article is issued in the general public interest and is meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive and should research further or consult an expert in this regard.