When it comes to the selection of insurance plans, Unit Linked Insurance Plan (ULIP) or other traditional plans, and so forth usually pop up in our mind. While some investors might confuse these plans with one another, a majority of investors are clueless about which one to opt for. In order to avoid misconception and confusion regarding these two products, it is highly recommended to understand their offerings, separately.
The best way to make your investment in either of the two is by comparing these plans. Comparison between ULIPs and traditional plans will allow you to see the brighter and the darker side of each plan. So if you’re looking forward to achieving higher rewards as well as results, then keep reading to find out how and why you should invest in an insurance policy:
Difference between ULIPs and Traditional Insurance Plans
While traditional investment plans were popular before ULIPs, the new-age ULIP Plans have gained popularity with its latest additional benefits and features. Unlike traditional policies, ULIPs provide its customers with the opportunity of growth and protection, at the same. This, in turn, makes it possible for the investors to earn higher returns on their investment. Take a look at these parameters of differentiation closely to spot the difference between the two:
|
DIFFERENCE |
ULIPs | TRADITIONAL PLANS |
|
Meaning |
Unit Linked Insurance Plans offers its investments with the benefits of protection as well as growth. | Traditional plans offer guaranteed maturity benefits to their investors as they invest in low-risk options of returns. |
| Aim | Provides a combination of investment and insurance under a single plan. |
Provides fixed returns over a longer period. |
|
Returns |
Depends on the funds that you have invested in. ULIP returns are based on your risk appetite. | Fixed returns as the provision of risks are low |
|
Term |
Compulsory 5 years. |
Locked till the date of maturity. |
|
Premium |
Premiums are distributed between expenses, life coverage, and investment funds. |
Premium is distributed among life coverage and income debt funds. |
|
Charges |
Availability of 4 main types of charges and more:
|
Offers only 2 types of charges:
|
|
Flexibility |
Allows the choice of your funds as well as the switching policy. |
No flexibility. |
| Systematic Investment Plan | Yes |
No |
Why invest in ULIPs?
1. Wealth creation
ULIPs are those type of investment vehicle that not only offers the investors with the protection of your family but also the creation of your wealth.
2. High Returns
After the revision of ULIPs by IRDA, ULIPs have become comparatively cheaper than what it was. While the charges offered by them is lower, the ULIP Plan’s returns are higher.
3. Liquidity
Under a ULIP plan, you are provided with an opportunity to make a partial withdrawal of funds after the lock-in period of 5 years.
4. Flexibility
Being a dual benefit product, ULIPs offer the policyholder with flexibility. It serves them with multiple options for investment in funds as well as permits the switching policy.
5. Loyalty additions
Certain leading insurance companies offer investors with loyalty additions in order to stay invested in the plan for a longer duration.
Now that you know how to yield maximum gains from a ULIP Policy, we are sure that the next time if someone asks you ‘what is ULIP?’, you can proudly say what it means. With the help of a ULIP Plan, you can ensure your investment for the longest period of time by gaining optimum returns and rewards.
