Wednesday, July 28, 2010

About ULIP

ULIP Unit Linked Insurance Plan gives life insurance in such a way that the value of the insurance policy at any given time would vary in accordance with the value of the underlying assets at that given point of time. ULIP is that kind of life insurance solution which would be providing benefits of protection and also flexibility in the investment. The investment is indicated as units and it is shown by the value that it has achieved which is called as Net Asset Value (NAV).
ULIP has been introduced by the insurance companies in many countries in the 1960s and is famous in a lot of countries of the globe. With the progress of time these plans were even mapped along with the necessity of life insurance to have retirement planning quiet successfully. In the times that we are facing now-a-days ULIP are capable of providing solutions for the planning of insurance, monetary necessities and various other kinds of financial planning like even planning of a child’s marriage.
Unit Linked Insurance Plan is such a monetary product which would provide you with life insurance and also investment just like a mutual fund. Certain percentage of the premium paid by you would go for the amount promised in the life insurance policy and the remaining amount will be invested in any investments that you would like to go for, be it equity, fixed return or even a mixture of these two investments also. ULIP in India are covered under section 80C of the Income Tax Act.
This ideology of grouping together the investment options and insurance under a single instrument was however challenged by the market regulator SEBI which took up this issue to the Supreme Court of India. The government of India curtailed this issue which was becoming a big tussle in the courts where arguments between the regulators were taking place for more than two months by ruling that Unit lined insurance products should be placed under the Insurance Regulatory and Development Authority (IRDA).
ULIP are being sold well in the recent years. ULIP offers a transparent choice for the customers enabling them to plan the necessities of the various stages of their life via market – led investments when compared to the regular traditional investment plans. These also provide a lot of variety when compared to traditional life insurance plans. These are normally presented in three broad types. Aggressive ULIP in which 80% – 100% is put in equities and the remaining in counted as debt. Balanced ULIP is one in which 40% – 60% is invested in equities and conservative ULIP is where only 20% of the premium is invested in equities.
Though ULIP variants are generally classified in this pattern, the exact debt/equity assorting might differ from one insurance company to the other. ULIP policy holder can choose to invest in a variety of funds which would be based upon the kind of risk he is willing to take. The policy holders can also enjoy the flexibility of ULIP and switch from one type to other type of ULIP when they want.

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