When you invest in a Unit Linked Insurance Plan, your premiums mainly go into a pool that’s called the Unit Linked Fund. The fund is basically managed by the insurance company and is allocated in varying ratios in equity and debt instruments. You can either decide the ratio of the fund allocation for yourself, or let the pros create a balanced portfolio for you. Due to the fact that both, equity and debt instruments are invested in, a ULIP provides you with dual benefits – investment and insurance. This makes ULIPs a financial product like no other.
ULIPs are fast becoming one of the most sought after policies in the market today. As they offer high ROIs coupled with affordable premiums, many working professionals who are just at the beginning of their career but are interested in investing and growing their funds find themselves seduced by the idea of a ULIP. Due to the fact that it has investment features, you can use a ULIP to save money for a rainy day, or grow your funds for a specific cause in the future. Similarly, ULIPs also offer the features of an insurance policy. This means that in case an unfortunate event takes place, the nominee you have named will receive the funds and your family will be taken care of.
As young working professionals who want to begin taking care of their family as soon as possible, ULIPs offer a means that is affordable and easy to use. The fact that one receives a hefty sum once the policy matures makes ULIPs a very popular financial product, especially amongst younger people who have not begun to think of other life insurance measures yet (or just want an option to save and grow their money quickly).
Here are some of the reasons why ULIPs are so popular today:
1. They offer fewer risks
One of the best things about ULIPs is that they come with fewer risks than other investment options such as mutual funds. When a ULIP is invested in, your premium goes into a combination of debt and equity instruments. However, if you are monitoring your funds carefully and if you sense a dip in the stock market, you can always switch them to debt instruments to keep them safe. Once the market risks are lower again, you can switch them back as per your convenience.
2. They are great for planning your future
ULIPs are one of the foremost policies that can be invested in if you want to plan for large scale purchases in the future, such as buying a house, sending your child for higher studies, or going on a vacation. Depending on the term you have chosen, you can chart out your life plan and then use the funds you get from the policy in order to meet your goals. When compared with other savings options such as FDs and bank deposits, ULIPs offer a much higher ROI as opposed to the smaller interest rates that come with FDs.
3. They provide life cover
Finally, as ULIPs are also used as an insurance tool, one must consider the fact that they offer life cover as well. Ultimately, what this boils down to is that if something unfortunate happens, your family will be taken care of. It is a good way to provide for their future.