Types Of Unit-Linked Insurance Plans (ULIPs)
Now let us discuss the different types of ULIPs available in the market. They are as follows:
i. Type 1 ULIP
Pays higher of the sum assured or fund value to your nominee in case of death of the policyholder.
ii. Type II ULIP
Pays both the sum assured and fund value to your nominee in case of death of the policyholder. In this case, premium is higher than that Type-1 plan
All types of ULIP plans usually have a lock-in-period of 5 years. So, it is a product meant only for the long term.
What Types of Funds do ULIPs offer?
Most of the life insurance companies offer a wide range of funds to suit one’s investment objectives, risk profile and time horizons. Different funds have different risk profiles. Possible returns also vary from fund to fund. Below given are details of some such funds
Many more combinations and varieties of funds under the garb of different names are offered by life insurance companies in the market today. But basically they are derived from the above mentioned funds.
Investment returns from ULIP may not be guaranteed. In unit linked policies, the investment risk in an investment portfolio is borne by the policyholder. Depending upon the performance of the unit linked fund(s) chosen; the policyholder may achieve gains or losses on his/her investments.
An important point to be noted is that, in ULIPs, the investment risk is borne by the investor. Also, you would do well to note that the past returns of a fund are not necessarily indicative of the future performance of the fund.