What Does Unit Linked Insurance Plan Mean?

Abbreviated as ULIP, the concept refers to a complex insurance instrument which involves purchasing products at their net values. But it also implies that policy owners make regular payments to another investment product. Therefore ULIP serves two main purposes: one of them is the traditional coverage any insurance policy involves, and the other is policyholders’ option to make qualified investments into stocks, bonds and even into mutual funds. The number of allowed investments is not limited.

Unit Linked Insurance Plan Explained

Similarly to savings products, unit linked insurance plans allow a diverse range of investments. But more than that, ULIP has the comparative advantage of providing its policy owners with an insurance coverage. Purchasing units in a unit linked insurance plan implies that other investors make similar purchases as well. The process is pretty much the same as for a mutual fund, so it involves a collective investment scheme. However, the type of the qualified investment that a policy owner may opt for depends on the type of the ULIP. Therefore one is strongly recommended to read out the plan’s terms and conditions before making up one’s mind.