Unit Linked
Insurance policy (ULIPs) is a combination of insurance cover plus investment. A
part of premium is paid to the insurance cover option and remaining part is
invested in various equity and debt schemes. Customers have the option of
choosing the type of fund either debt or equity or a mix of both based on their
investment need. Various types of funds available in ULIP Plans are explained
below
Equity
Funds: Initially invested in company stocks. Risk coverage is Medium to High.
Income,
Fixed Interest and Bond Funds: This type of funds are Invested in government
securities, corporate bonds and other fixed income instruments. Risk coverage
is Medium.
Cash Funds:
Cash Funds also known as Money Market Funds. This type of funds is invested in
bank deposits, cash and money market instruments. Risk coverage is low.
Balanced
Funds: This type of funds is combining equity investment with fixed interest
instruments. Risk coverage is medium.
Benefits of
ULIP: A unit linked insurance policy (ULIPs) acts like a savings vehicle but
also has the benefits of getting insurance cover along with the investment.
Example of
ULIP: Suppose, a person buys a ULIP which is combination of risk cover plus investment. After
paying premiums, the insurance cover is given to the person by deducting some
charges by insurer for what he had paid. Major portion of amount is invested
into fund chosen by person and that is converted into units. While cancellation
of units Fund management charges, mortality cover and similar expenses are
deducted.
Source:
http://www.policydunia.com/ulips/
