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 The Unit Linked Insurance Plans

Simply put, ULIPs are life insurance plans which have a mandate to invest upto 100% of the corpus in equities with individuals having the choice to shift between equity and debt. Several studies have shown that equities are best equipped to deliver better returns compare to the fixed return counterparts, like Bonds and Government securities. Given the fact that the life insurance is a long term contract, equity oriented ULIPs are these days becoming the favorite for any policy holder. ULIPs offer the opportunity to invest a 100% in equity and provide individuals the flexibility to shift to up to 100% in debt. This is the only case in the entire life insurance policies gambit of investments. It is entirely upon the individuals how they wish to allocate their premium towards equity and debt, which is not the case with the endowment types. Wherein the investment avenues are fixed and one have to be contended with the insurance companies investment mandates and allocation decisions.

This has been the major primary reason why most of the advertisements of the life insurance products are for the unit linked insurance plans and such has become the popularity of the ULIPs in the recent past. They have certainly outpaced the growth of the regular endowment plans.

Now coming on to the sum assured factor, ULIPs insured the paid either the sum assured or the investment corpus whichever is higher. An individual who invests into a ULIP gets the benefit of sum assured as well as investing into equity, once he plans to come out or when there is  certain demise then the nominee or the family stands to benefit from either the investment corpus or the sum assured, of the two whichever is higher. 

ULIPs are available in three broad variants:- 

1) The aggressive ULIPs which invests upto 100% of their corpus in equities. 
2) The balanced ones, which invests up to 60% of their corpus in equities and 
3) The conservative, which invest up to 100% of their corpus into debt securities and money market instruments.

Individuals are free to decide whether they want to invest their money and where they want to invest their money. For example, individuals with an appetite for risk can invest their entire money into equity linked ULIP plans which is an aggressive mode and the ones who do not have a risk appetite, can go more towards the conservative side or the balanced side, keeping in mind their risk appetite. Apart from the benefit of the variance through which you can invest across the asset class ULIPs also provide individuals with the flexibility of terminating or resuming premiums, increasing or decreasing them and paying top-ups, i.e. one time sum over and above the regular premium, whenever possible. 

Hence, in such scenario, they have been very flexible in positioning themselves as the most viable product in insurance industry. Whether one want to increase or decrease the premium or want to discontinue premium for a period of time and if one has come out with some large money through some other maturity, one can directly infuse that sum in same running ULIP insurance policy. All such options are only available in the ULIP insurance policies and the same shall not be there in others, like the endowment, money back, child, pensions and so on. 

When you opt for a ULIP, you will have to answer the questions about how much premium can you pay.  Depending upon the premium amount you stake, you are offered a sum assured as a multiple of the premium.  For instance, if you are comfortable paying Rs.10,000/- annual premium on a ULIP, the insurance company will have you a sum assured say 5 to 20 times of the premium amount. Your sum assured could vary from 50,000 to 2,00,000/- range. 

How much insurance cover you need, of course, is somewhat different in other insurance companies like the LIC. In LIC ULIPs, the sum assured premium relationship works in the traditional way only. So, you need to stake how much sum assured you are looking for and a premium is calculated as the 1/10th of the sum assured. If you opt for a sum assured of say Rs.1.00 lac, your annual premium will be Rs.10,000/-.

But before laying your hands on any of the ULIP insurance policy, an individual must stake his objectives of investing in the policy which are namely:

Identifying your needs and the reasons to buy the policy.

How much of the insurance you will need.

Then, the product which you will consider before, investing or protecting.

Lately the company with which you want to get attached with  after comparing and analyzing the insurance policy in details.   
 
An individual must keep notice of the following if he is looking for insurance policy.

One should review his insurance needs and circumstances on a periodic manner and choose the policy that offers benefits that most closely fits the need. 
To ensure that you get afford the premium payments; if the premium amount increases later, can you still afford it or not. Never sign an insurance application, until you review it carefully, to be sure of, all the answers are complete and accurate. Never buy an insurance policy unless you intend to stick to that policy for long, it can be very costly to you during the years if you try and come out or quit the insurance policy.

Never drop one policy and buy another, without a thought. Study the new policy and the existing one replacing your insurance is a major decision and should be taken in line with the costs and the risks that are attached with it.  

Always read your policy documents carefully, before complying yourself towards any insurance policy.

Although, your insurance policy gives you long term protection, while offering you immediate tax benefits, your insurance needs are usually greater than the need for the tax benefit in the given financial year or any saving and investment need. 

Hence, insurance primarily is subject of more of protecting your family rather than investing or taking tax benefits for savings. Life insurance has been universally acknowledge as an effective tool to eliminate the risk and primarily risk only and substitutes certainty for uncertainty and ensures timely aid of the family in the unfortunate events of the death of the bread-winner. Hence, the life insurance provides assistance if premature death occurs, which may leave the dependent family to fend for itself and also for old age, without visible means of support.  

Buying life insurance cannot be compared with other investment decisions, especially the stock market investments where one waits for the right time to buy and sell. As far as life insurance goes, the best time to buy life insurance is more linked with your goals, needs and your well being for protection.