Unit Linked Insurance Plans (ULIPs) have succeeded in bringing together two important aspects of your life—insurance and investment—and merge them in one single solution. That way, instead of monitoring and managing different products for different requirements, you can meet all your requirements with one single solution.
What are ULIPs?
ULIPs are insurance plans that come with a market linked investment component. In this type of plan, a part of your premium is used for providing life cover. The rest of the amount is invested in market linked options like mutual funds, which give you returns.
ULIPs allow you to customise your investment by selecting the mutual fund you want your money to be invested in. The returns you get depend on the performance of the fund you have selected. Moreover, most ULIPs allow you to switch funds from time to time, according to your needs.
Where is your money invested?
ULIPs typically invest in different types of mutual funds as elaborated below:
Equity Mutual Funds
These types of funds invest primarily in shares of companies listed on the stock exchange. These funds are suitable for you if you have a high risk appetite and want to earn high returns over a longer period of time.
Debt Mutual Funds
These types of funds invest in bonds issued by the government or private companies. Debt funds are usually considered low risk products that can provide stable returns. However, when compared to aggressive options like equity mutual funds, they may provide lesser returns over the long term. You can choose this kind of fund if you have a low risk appetite and prefer stability over returns.
Balanced Mutual Funds
Balanced funds invest in a mix of equity and debt options. They aim to combine the returns and stability aspect of equity and debt respectively. These funds are suitable for you if you have a moderate risk profile.
The returns you get on ULIPs depend on the type of funds you select. While making this selection, keep different factors like your risk profile, age, income, etc. in mind. This will ensure that your investments and returns are as per your needs.
When selected appropriately, ULIPs can not only protect you financially, but also provide good returns.