Common Features Of ULIPs
Updated On Jul 28, 2021
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ULIPs are market-linked insurance plans that provide market-linked profits as well as essential family financial security. A unit-linked insurance plan (ULIP) is an investment that combines life insurance with market-linked wealth creation. Furthermore, because these plans may invest in both stock and debt markets, they may outperform traditional tax-saving strategies.
Common Features Of Unit Linked Insurance Plans
Here are some of the common features of Unit Linked insurance plans
Option For A Partial Withdrawal
Under the ULIP's Partial Withdrawal Option, the policyholder can take money from the insurance fund value. This basically implies you can withdraw a certain amount of money from your existing reserve. After a five-year lock-in term, this clause is frequently allowed. This helps you to meet unforeseen financial requirements by using your emergency fund, which you have built up over time, rather than relying on your other assets and resources.
You can take money out of your account to cover any future financial needs.
After five complete policy years, you can make partial withdrawals from your money. Some policies, however, require the life guaranteed to be of legal age before the money may be withdrawn.
Mandatory Lock- In Period
It refers to a five-year term beginning on the policy's start date during which the proceeds of the policy cannot be paid to the policyholder except in the case of death or one of the policy's covered events. ULIP plans allow policyholders to invest their premiums in a variety of different funds. Because the policyholder cannot withdraw the funds until a specific period of time has passed, this encourages them to invest. Investors are lured to the consistently increasing larger rewards at the conclusion of the policyholder term, making this a lucrative activity.
Fund Switching Option
Unit-Linked Insurance Plans (ULIPs) provide the possibility of switching funds, which gives this financial instrument a great deal of flexibility. Investing in debt or equity funds or a combination of debt and equity funds is possible. One can shift investments from one ULIP fund to another within a plan. A ULIP fund might comprise stock, debt, or a combination of the two.
Long Term Investment Alternative
When ULIPs are held for a long period of time, say 15-20 years, the actual benefits are realised. Market volatility and costs will be offset by remaining invested for a longer period of time.
Money is compounded over a lengthy period of time, which has shown to be advantageous in the case of ULIPs. In the long run, investors choose ULIPs as a long-term investment option, as their net returns are strong compared to those of their peers. In advantageous circumstances, these strategies work effectively and generate good outcomes over the long-term.
To give greater returns to the investor, ULIPs are designed to operate in line with market circumstances. You can choose from a number of investing objectives when choosing one of these programmes. As a result of the characteristics listed above, ULIPs are quite effective for an investor.
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.