ULIP products give you the advantage of life insurance cover together with the market calibrated returns. In a ULIP just like,’ with profit’ policies, the insurer deducts charges towards life insurance (mortality charges), administration charges and fund management charges. The rest of the premium is used to invest in a fund that invests money in stocks or bonds.
Which is better, unit-linked or ‘with profits’?
The two strong arguments in favour of unit-linked plans are that — the investor knows exactly what is happening to his money and two, it allows the investor to choose the assets into which he wants his funds invested.
A traditional ‘with profits,’ on the other hand, is a black box and a policyholder has little knowledge of what is happening. An investor in a ULIP knows how much he is paying towards mortality, management and administration charges.
Plans available : Trade off between return and risk.
- High equity exposure : high risk-high return
- Medium equity exposure : medium risk – medium return
- Low equity exposure : low risk- low return