Life Insurances 164 views
You would always want to maximize your savings and secure the future of yours as well as your family members. There are various investment tools that you can opt to achieve the same. But insurance is something everyone wants in this case. ULIPs offer protection as well as savings with a degree of flexibility to investors. Also being market-linked, ULIPs can offer enhanced returns. While traditional insurance plans like endowment plans, term plans and whole life policies offer risk coverage, safety and return. So, in order to help you arrive at a right decision, we have compared both the investment tools on various aspects.
Investment risk and premium
Traditional life insurance policies do offer lower returns. But the premium and the investment risk here is quite less compared to the ULIPs that come with high premiums and may lead to low post- tax returns. But traditional term plans assure a large amount in the event of death at a comparatively low premium rates and invest the saving of high premium, which would go out from your pocket if you invest in ULIP, in equity funds that offer higher return and more tax benefits compared to ULIPs.
ULIPs provide a greater deal of flexibility by allowing you to invest according to your risk profile, convenience and financial commitments. With ULIPs, you can either opt for investment in equity, debt or a combination of both called hybrid funds. However, you won't get the same investment flexibility in traditional life insurance plans as funds here are invested as per the discretion of the company.
You can track your investment portfolio through most of the ULIPs that offer regular update on the percentage of the premium you have paid as well as the charges levied. Additionally, you can be updated about your fund unit holding. In case of traditional plans, the premiums get paid in a common ' with profits' fund and thus does not allow you to track your investment portfolio.
With ULIPs, you can redeem the units collected at the prevailing unit prices during the maturity. You can also receive loyalty or additional units during the time of maturity. You receive sum assured plus bonuses, if applicable, with traditional insurance plans at the time of maturity.
You can partially withdraw the funds from the ULIPs, while the same is not allowed in traditional life insurance policies.
You can switch between the funds via ULIPs. But with conventional insurance plans, switching is not possible.