Should You Buy Life Insurance Or ULIPs?
Updated On Nov 15, 2021
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A ULIP is a Unit Linked Insurance Plan that includes both insurance and investing opportunities. The goal of a ULIP is to provide the added advantage of life insurance coverage as well as the opportunity of long-term wealth growth. A ULIP plan has numerous advantages. Funds switching, premium allocation, surrender option, numerous rider add-ons, top-up facilities, and so on are all available.
Prior to the introduction of ULIPs, traditional insurance plans were a popular choice among investors. These plans pay out a lump sum payment plus bonuses after a certain period of time or upon death. The premiums for such plans are set, and the payout is guaranteed regardless of whether the life assured dies or lives. It is a fantastic option for all the benefits of life insurance, investment, fixed income, and tax savings because it is a risk-free product.
ULIP vs LIfe Insurance Plans: Which is Better?
Here if the difference between a ULIP and a traditional Insurance plan based on different aspects:
1. Aim Of The Plan
ULIPs are distinguished by the fact that they combine insurance and investment into a single package. ULIPS are more likely to generate higher returns depending on market conditions because they are market-linked. This is how it works: You pay a portion of your premium for life insurance, and the rest is invested in the market in funds that you select based on your risk profile and risk appetite..
Term plans, on the other hand, function as standard insurance products with fixed returns and no risk. These insurance policies invest in low-risk return options and provide guaranteed maturity proceeds. In the terrible event of your premature death, it might be used to replace your income in the family as a financial instrument. Riders can be added to a base policy to expand coverage to include things like accidental death benefit, critical sickness benefit, and so on.
If you want to take some risks in exchange for higher long-term profits, ULIPs are the way to go. This is why most ULIP policies have a 5-year lock-in period, including the Future Generali ULIP insurance. You can seek out more adventure with your ULIP investments. You can choose from plans that pay regular income benefits to your dependents to plans that pay back all of your premiums if you live to the end of the policy's term.
3. Lock- In Period
ULIPs have a mandatory 5 year lock in period
Since, life insurance plans provide security for a fixed term, they a lock in period till maturity of the policy
You have the option of moving funds and allocating premiums, making ULIPs a more flexible option
Life insurance are simple fixed term plans providing death benefit to the beneficiaries in case of the unfortunate demise of the life assured.
5. Risk Factor
UlIPs are closely linked to the market, and hence their returns are influenced by market circumstances, as opposed to life insurance plans, which have a set duration and thus pay out the guaranteed sum and are absolutely risk free.
Traditional insurance plans are often recommended since they give a protective cover and secure the future of you and your family. When compared to ULIPs, the risk is lower, and the rewards are guaranteed. A ULIP, on the other hand, is suited for those with a risk appetite who wish to protect their family financially while also maximising their investments.
You may also like to read - Have Responsibilities Of Financial Dependents? Consider Buying Term Insurance
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.