Insights On ULIPs VS Traditional Life Insurance Plans
Updated On Apr 26, 2021
Table of Contents
It is always essential to secure the financial assets and interests of yourself and your family. The earlier you begin, the more successful you will be in saving up to your goals and keeping your loved ones protected in case of your demise. This can be done in two ways, namely, via traditional life insurance plans and unit-linked insurance plans (ULIPs).
ULIPs are flexible and versatile plans with a variety of features. Life insurance plans also bring to their customers multiple options to protect their financial interests. To know which one is best suited to you, take a look at the comparison between them.
Also Read:- 5 Popular ULIP Myths Clarified
Comparison: ULIPs VS Traditional Life Insurance Plans
Here are the most common differences between these two popular types of plans.
|
Points of Comparison |
ULIPs |
Life Insurance Plans |
|
Nature of Plan |
ULIPs provide insurance benefits as well as investment options. |
Purely an insurance plan with no investment component. |
|
Risks Involved |
Depends on the risk-taking appetite of the policyholder. |
Low to negligible risks involved. |
|
Withdrawal of Funds |
Partial withdrawals of funds allowed under ULIPs. |
Funds cannot be withdrawn suddenly under most of the traditional life insurance plans. |
1. Nature of Plan
ULIPs are popular for combining both investments as well as insurance options under one plan. The premium paid by the policyholder is divided between the insurance premium and market-linked investment units. You can choose the funds you would want to invest in. In life insurance plans, there is no market-linked investment involved.
2. Risks Involved
In a ULIPs, you can control the amount of risk you want to undertake. Since you can choose the type of funds you want to invest in, you can select according to the risks they provide. For traditional life insurance plans, the policyholder has no such control over investment funds. Since it is not affected by market trends, there is very little to no risks involved.
3. Withdrawal of Funds
ULIPs facilitate partial withdrawal of funds at any time during the policy term. However, in the case of life insurance plans, this is not possible. Moreover, there may be penalties levied if you withdraw before maturity.
You May Also Like to Read:- How Does A ULIP Work?
Conclusion
Both ULIPs and life insurance plans have their own features and merits. The choice of the plan largely depends on your personal financial goals and risk appetite. We hope these differences between the two plans helped you understand them better and take an informed decision.
