Investment in Unit Linked Insurance Plans in India

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ULIP Insurance Plans
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Investment in Unit Linked Insurance Plans in India
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• About Insurance Products Insurance Products may
  be mainly classified as
• (I) Traditional Products These are just like
  fixed Insurance Income products, I.e., whatever
  you need to invest and the returns you would
  receive are predetermined / fixed. At maturity
  (end of the policy period) you will receive the
  specified maturity amount. In case of any
  unfortunate happening during the period of the
  Policy, your family (nominated person/s) will
  receive the 'Sum Assured' (Insured Amount), and
  the policy will be terminated.
• These products invest into very low risk
  investments throughout their term (They should do
  so and have to confirm the Govt. and Insurance
  Regulatory and Development Authority rules). The
  point here is these products are sufficient only
  for the predefined Insurance needs range only.
  The returns on these products cannot meet the
  future requirements of the returns to meet the
  inflation.
• (ii) Unit Linked Products These products are
  just like mutual funds and carry investments into
  a broad spectrum of investments ranging from
  'High' to 'Medium' to 'Low' risks (Funds). These
  Funds are managed by high profile, expert
  organizations called 'Fund Managers'.

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• The investments made into these products are
  invested as to meet your Insurance and a major
  portion is invested for your Investment needs. Of
  course, obviously there will be some charges for
  fund allocation and fund management which are
  quite negligible when compared to the returns and
  mainly the insurance cover.
• WHY EITHER MUTUAL FUNDS OR UNIT LINKED INSURANCE
  PLANS? The answer lies in the financial view of
  'RETURNS FROM INVESTMENTS'. The only investments
  whose returns get along proportionately enough
  with the ever growing inflation rate are Real
  Property and then it's 'EQUITY'.
• Yes, you can invest in real property. But, then
  the investment risk needs to be diversified,
  I.e., investing in various assets and they also
  need to respond to your various types of needs
  currently and in the future.

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• WHY 'UNIT LINKED INSURANCE PLANS'? WHY NOT MUTUAL
  FUNDS? Certainly one should invest into mutual
  funds as they help to diversify the investment
  risk. Currently in India they are very
  interesting as Govt. has restricted the levy of
  entry fees.
• But, then Mutual Funds cannot cater for the (I)
  Insurance needs. (ii) The Mutual Funds can be
  liquidated whenever the customer thinks the
  returns look enough (except those Mutual Funds
  with a Lock In period of 3 to 5 years and have an
  IT exemption. But, then 5 years is not a much
  longer period.) and thus reducing the capital
  base in an irregular form of risk. The point here
  is even though the Mutual Funds give very good
  returns in a long term, the investments have to
  be made (by the Fund Manager) keeping in the view
  the liquidity required for a shorter period.

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• ULIP Insurance Plans address both the Insurance
  and Investment needs efficiently. Currently, in
  India, once you take a policy, you can surrender
  or liquidate or partially withdraw only after the
  completion of 5 years. They provide insurance and
  invest into Mutual Funds for considerably larger
  periods and hence have unbeatable larger capitals
  in the market. The large capital enables highly
  efficient and highly qualified Fund management
  due to negligible transaction costs as compared
  to the capital.

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