Today, insurance particularly life insurance is one of the major ways of securing ones life and ones family from untoward incidents and from sudden financial losses. Life insurance policies such as term life insurance and whole life insurance policies offer that protection for a person's life.
Nowadays, many people are moving toward life insurance because of the advantages that of having a policy. For a long time there were no innovations in life insurance as a product. But, in the recent times, a new innovation has been introduced. This product is called ULIP or Unit Linked Insurance Policy. ULIP are a new age insurance policies. These are not just insurance policies, but they are also investment plans. As an insurance policy, unit linked policies offer life insurance advantages. And as an investment plan, it provides wealth that has been built over time.
ULIPs are special types of policies because they offer both the advantages of an insurance policy and investment plan. This is particularly advantageous for those people who may not be able to afford a separate insurance policy and separate investment plans. Under such conditions, ULIPs can be a great advantage.
When we look at how unit linked policies work, it is evident that they are similar in nature to units of mutual funds. The premiums that are paid by to the insurance company are invested in these units in the stock market. The health of this investment plan is calculated on a regular basis and is disclosed to the policy holders. Until now, it seems like an average investment plan, but the rest of the story is that it is basically an insurance policy whose premium proceeds are directly invested in special ULIP units. The average life of Unit linked policies is upto 20 years and more. If at all, the policy holder passes away during the policy period, the ULIP units market value is ascertained and the proceeds are passed on to the policy holder's nominees.
ULIPs are often compared to their market counter parts mutual funds. Mutual funds usually, have a life time of about 5 to 10 year. Within this time, the mutual fund may or may not be able to grow as desired. But in case of ULIPs whose average life is more than 15 years and can range up to 25 years, the fund will receive ample time to grow into wealth. This makes it more advantageous than mutual funds.But, these are not for those who want short term investment plans or short term insurance policies. As the cost of operating ULIPs is very high, it is better to stay away from them. But, those who are seriously looking forward to investing for a long time, then they are the best that one can get.
