Insurance and investments: While they aren’t both apart of everyone’s lives, both can be important to have, that is, if one is wise with their decisions. But you can be both with unit linked insurance plans or ULIPS. Do you know how they can impact you?
Linked Versus Non-Linked Insurance Plans
In the simplest terms possible, non-linked insurance plans are traditional forms of insurance. They have been around a lot longer than linked plans. On the other hand, a linked insurance plan is connected to the stock market. In other words, a ULIP offers not just insurance but an investment plan.
Many enjoy the two-in-one deal they receive from opting for a linked insurance plan versus a non-linked option.
The Best of Both Worlds
Linked insurance plans allow an individual to potentially receive both security and gain, giving what some may refer to as “the best of both worlds.”
So, how a ULIP works is that part of the premium you pay for your insurance goes straight into investments. Those with a linked insurance plan can receive a return on their investment and benefit from tax benefits while also receiving the insurance needs they require.
Best of all, with a ULIP, one can choose from debt, equity, or hybrid funds, making these plans highly flexible to your personal investment needs and the risks you’re willing to take.
Go hard, or Play it Safe
However, whenever an investment is involved, even with a linked insurance plan, there is only so safe one can play. There is always a potential for risk. But the nice thing about a ULIP is that you can make different types of investments which can have different risks at hand with some safer than others.
Additionally, it’s important to keep in mind than when you opt for a linked insurance plan, premiums are not fixed like they are with a traditional policy. Investment-linked insurance premiums gradually increase with the policy-holder’s age.
Choosing a Unit Linked Insurance Plan
Before selecting a unit linked insurance plan, it is important that you know what your specific insurance needs are such as retirement planning, child education, and so on, and of course, how much coverage you may be needing.
Secondly, it is vital to keep the following in mind:
- Are you willing to take the financial risks of a linked policy? If so, what is your risk appetite?
- Do you know how to make wise investment decisions (e.g., who to invest in)?
- Do you consider yourself semi-knowledgeable in how the stock market works?
- What are your investment goals, and thus, the best fund options for you (e.g., equity, debt, both)?
- How long do you need to stay invested to receive a return?
- How involved would you like to be?
- Are you willing to pay extra fees and charges as well as pay unfixed premiums?
When picking any insurance policy, there will always be things to consider. However, one thing is for sure: one type of plan is not a one-fits-all.
It’s true that unit linked insurance plans are not for everybody. However, for those who do opt for them, they enjoy its versatility and the ability to invest while receiving insurance at the same time. It’s an interesting concept, but weigh in all pros and cons before deciding if a ULIP is meant for you personally.
About Aegon Life:
With a complete product suite of life insurance plans, superior technology, and customised service, Aegon Life Insurance Company Limited launched its pan-India operations in July 2008. As a joint venture between Aegon – world’s leading financial services and Bennett, Coleman & Company – India’s leading media house, Aegon Life Insurance adopts a local approach to facilitate customer interaction. Our vision to be the most recommended new age life insurance company has enabled us to leverage digital platforms that bring transparent solutions to customer needs. Our financial planning and investment solutions include term life insurance plans, pension plans, unit-linked insurance plans (ULIPs), health insurance plans, child education plans, and more.