subject: Take Your Pick Between Term Insurance And Ulip [print this page] When it comes to investing money, there is always a debate regarding the type of insurance to choose. In India, insurance plans of unit link and term have always been head-to-head and there is a range of theories floating around for both of them. We feel that they are equally essential for an investor to have a balanced and safe saving scheme. However, for an individual who does not understand the markets in depth, this could be extremely confusing. This article will help you put into perspective these plans and know which would be the right one for you.
Understanding Term Insurance
Term insurance is a basic type of investment, wherein thereis an agreement between an individual and an insurance company, which states that with a certain sum of money or premium at regular interval for a specified time, the company will offer coverage for accidents, deaths or medical expenses. In the end, if there has been no compensation in case of death of the insurer, then this amount may have to be renewed for further coverage.
Understanding ULIP
The Unit-Linked Insurance Plan(ULIP)is another tool for investment for individuals. Just like theprevious option, you need to pay a certain amount of money or premium to the company. Then the company invests this same amount into the market after deducting its fees. According to the market performances and fluctuations, the company offers returns. Hence, this works well for both the company as well as the investor. At the same time, the company also offers a certain amount of coverage in this plan.
Comparing Term Insurance and ULIP
Insurance of a specific term offers highest sum and lowest premium charges, unlike ULIP that has high charges and nominal insurance cover. However, in the case of the latter, you get returns when the policy matures and you may increase the premium proportionately with an increase in your income, which may not be the case in term plans. Additionally, it is flexible forvarious asset classes, thereby helping you maximize returns. Term, on the other hand, may be stopped at the end of premium term, as the life cover exists only for the year for which premium is paid.
Thus, both have their set of pros and cons and it depends on what kind of coverage you are looking for as well as age and health background. You may even opt for investing a bit in both for a better outcome.
by: Sudeep Desai
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