A unit linked insurance policy is one in which the customer is provided with a life insurance cover and the premium paid is invested in either debt or equity products or a combination of the two.
In other words,it enables the buyer to secure some protection for his family in the event of his untimely death and at the same time provides him an opportunity to earn a return on his premium paid.
In the event of the insured person's untimely death,his nominees would normally receive an amount that is the higher of the sum assured (insurance cover) or the value of the units (investments).
However,there are some schemes in which the policyholder receives the sum assured plus the value of the investments.
Every insurance company has four to five ULIPs with varying investment options,charges and conditions for withdrawals and surrender. Moreover,schemes have been tailored to suit different customer profiles and,in that sense,offer a great deal of choice.
The advantage of ULIP is that since the investments are made for long periods,the chances of earning a decent return are high.
Just as in the case of mutual funds,buyers who are risk averse can buy into money market fund while those who have an appetite for risk can opt for balanced or equity fund.
Unit linked education policy would be like a unit trust that comes with an insurance component.
The old insurance was not linked to a unit trust and all the money was invested in fixed deposits or TB's and bonds which register average returns.
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