What Is The Difference Between ULIP And The Term Insurance Plan?
Updated On Sep 04, 2021
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A Unit Linked Insurance Policy (ULIP) is a type of insurance that is also equipment for the purpose. In ULIPs, one portion of the payment is used to pay for the insurance, which is known as the mortality charge, whereas the other portion is placed in market funds, securities, debts, shares, or a combination. You have complete control over the funds you choose. On paper, ULIPs are commonly thought to be among those "too wonderful to be genuine" plans.
Term insurance is a program that only pays out if you die. In basic terms, it ensures the economic stability of your family in the event of your death. It essentially serves as an affordable income replacement tool in the event of your premature demise. It protects your candidate for the term of the policy all with no changes in the premium, despite the fact that it has no investment component.
Difference Between ULIP And The Term Insurance Plan
Here are a few differences between ULIP and the term insurance plan
If you're trying to invest for the long term, ULIPs are a good option. The life insurance benefit is included in the whole package. The investment component of ULIPs is the key selling factor. Life insurance plans exist to provide regular income distributions to the family or dependents of the deceased breadwinner or to provide you with a return on all premiums paid if you live to the end of the plan's duration.
Also Read - Is Ulip A Good Investment?
Returns And Risks
ULIPs are the way to go if you want to take certain risks in exchange for higher long-term profits. This also explains why most ULIPs have a 5-year lock-in period. With your ULIP investments, you can seek out more adventure. You can choose from plans that provide a regular income benefit to your dependents to plans that return all premiums paid if you live to the end of the policy's term.
ULIPs Are Preferred As Investment Vehicles Over Other Types Of Investments
ULIPs have the appearance of a traditional investment vehicle. If you want to invest in the market but lack the necessary expertise, ULIPs are a terrific way to get started by delegating the actual work to fund managers. You can pick from equities funds, fixed income security funds, or a hybrid/balanced fund for your investing and risk profile. You may also track your portfolio with most Unit Linked Insurance Plans. As your risk appetite changes based on your financial needs and changing life circumstances, you can choose between these products.
You're probably aware that comparing Term Insurance and ULIPs is akin to contrasting chalk and cheese. Despite the fact that they are both insurance products, they serve different objectives. Term insurance financially protects your family in the event of your untimely death, whereas ULIP premiums are split into two parts, one of which is set as insurance and the other of which is invested in various funds. A ULIP intends to invest in your financial future, whereas Term Insurance protects your family when you are not present. It's not a good idea to use the same tape to measure both because their functions and benefits are so dissimilar.
You may also like to read - Can I Stop A ULIP?
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.