Over the years, life insurance has usually been
synonymous with life protection for the family of the policyholder upon his
death. However, these days, it offers a lot more. In order to meet demands for
better returns on insurance, ULIPs were designed as a dual benefit product.
This product is a unique way to invest in the equity market along with getting
the benefit of a life cover at the same time. What makes ULIPs even better is that, it
is one of the most transparent financial products currently available. ULIPs
have appeared more beneficial for the customer after having gone through a lot
of regulatory changes in the recent past. Some of the reasons that ULIPs are
still a good bet are as mentioned below.
Better returns: Following
the revised guidelines for ULIPs, commissions and charges have been capped.
These days, the policyholder has an opportunity to get higher/ better returns
on their investment, as a larger amount will be going into the selected
fund(s).
Longer lock-in period: Keeping
your money secure is an essential part of your ULIP investment. Following the
revision of the guidelines for ULIPs, the lock-in period has been increased
from 3 years to 5 years, thus giving the corpus more time to grow. Also, since
ULIPs are essentially long term tools, the increased lock-in period becomes
attractive for those looking at long term savings, thus ensuring more
protection for a longer period.
Lower surrender charges: In
the past, ULIP’s had a 30-40%
surrender charge. However, with the introduction of the discontinuance fund,
there is a reduction on the cap on discontinuance charges, which means that the
policyholder does not have to forgo large amount of money as surrender charges.
No policy lapse: Previously,
non-payment of a premium could result in a policy lapse. However, following the
revised guidelines it is not so. In case of discontinuance, i.e., a situation
that could arise from non-payment of premium, the fund value gets transferred
into a separate fund known as the discontinued policy fund/ policy account
value till the policy is revived or upto the end of the revival period,
whichever is earlier. The policy remains in force with the risk cover as per
the terms and conditions of the policy. This fund gives minimum guaranteed
interest rate of 4% on the discontinued fund (subject to change in line with
interest rates provided by the savings accounts of certain banks, during the
period the policy was in discontinuance).
Balance your portfolio: The
biggest advantage of unit linked products is that they are flexible tools as
they allow you to safeguard the investment against the vagaries of the market
through the fund switch option. Few insurers offer unlimited free fund
switching options, allowing you to alter the proportion of equity and debt
investments, to help you achieve best returns in accordance to your age, risk
appetite and financial goal.
Twin benefit: The
biggest advantage for ULIPs is that, this type of plan comes with the twin
benefits of life protection as well as a market-linked growth for the
investment. Since this product is a bouquet of multiple benefits such as risk
cover, extra coverage in the form of riders, long term investment, tax
benefits, etc., bundled in one along with a good spread of risk, it can be
treated as a comprehensive financial tool. Changes in the ULIP guidelines with
regards to reduced remuneration have resulted in attrition in its distribution.
However, for an aware customer, it is still one of the best options available
today in the financial market .
[Source: http://lifeinsurance.bajajallianz.com/ulipedia/ulips-are-still-a-great-investment-option-heres-why-2/]
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