What is a ULIP product


ULIP is sound common name in the market. It has very complicated structure thus it is little difficult to understand. Here is a better definition and description on the product ULIP for understands the product well.

ULIP the Unit Linked Insurance Plan is a product bundles with both life insurance cover and investment opportunity. Yet another word, it is a product combining life insurance cover with investing.

ULIP is a product generally provides option to select life insurance cover that required by the subscriber and giving him a chance to get profited from the investment. ULIP works like any other mutual fund schemes. A ULIP subscriber has vast option to select his/her own investment instruments upon the risk profile of the subscriber. This can be equity or debt instruments. If it an equity or equity related instruments a subscriber selected to invest, compare with any other mutual fund schemes, ULIP also not providing any guaranteed return to the subscriber.

Hence it is a plan to provide life insurance and investment opportunities to the subscriber, the policy you pay provide you not only insurance cover but, a part of the premium gets invested in specific investment funds of your choice. The funds an investor can choose between zero to 100 percent equity or full debt instruments.

A policy holder of a ULIP, you have option to decide your premium paying term, mode of payment and duration of each premium. Insurance cover that providing by ULIP would include death cover, disability and critical illness cover depends on the requirement of the policy holder.

All the charges like premium allocation, fund management, policy administration and mortality charges for you insurance get deducted time to time from the premium you are paying to against the ULIP policy.

The investment of the ULIP fund divided into units like any other mutual funds, and will be published in the newspaper time to time. In case of the death of policy holder, insurance company will give either the insurance amount of the value of the fund units, which ever is higher, to the nominee of the policy holder. Such insurance amount paying to the nominee in case the death of policy holder, will vary depends on the nature of the ULIP policy.

In a Type 1 ULIP policy, nominee will receive either the insured amount or the fund value, whichever is higher, to the nominee. In case of the ULIP is Type 2, the nominee will receive the insurance amount as well as the fund value of the ULIP.

If you survive the policy term or redeem the policy in mid-way, you will get the net asset value (NAV) multiplied by the number of unit you redeemed.