INSUBCONTINENT EXCLUSIVE:
Unit-Linked Insurance Plans.
When we think of risks, we only associate with physical risks (death, disability, critical illness)
The risks of market volatility and lack of financial discipline are real, significant, and often, unacknowledged
ULIPs allow for management of all these three risks due to insurance cover, policy lock-in (to prevent impulse spends from funds put aside
for long-term needs) and investment options of automatic profit bookings, fund options and fund switching provisions.
The smartphone is
perhaps a good anecdotal comparison, to explain how ULIPs extend themselves to multiple objectives of financial planning and risk management
Akin to smartphone, that incorporates several capabilities into a nifty, handheld device with a built-in camera, utility applications to
book cabs, online wallets etc., ULIPs too pack in a host of benefits for its customers.
The multifaceted ULIP allows for flexibility of
investment, based on return expectations and risk appetite
The cover is significantly higher than invested amount in initial years, to fit individual life goals
Eventually, with a built-up corpus, charges for life cover are also exempted, making this a cost-efficient proposition.
ULIPs, while helping
one stay on financial discipline pathway, gives one option of withdrawal or adding onto corpus over longer term, as well
ULIPs have an in-built agility to cater to evolving needs of a customer through enabling switches between asset classes to book returns,
scheduling systematic withdrawals to supplement income, or enhancing investments during earning years for a given future goal
Further, convenience is unparalleled with cumbersome documentation or tax implications taken out of picture when one buys a ULIP.
Since
there is aspect of regulated and defined reduction in yield, value for money element is taken care of
ULIPs coupled with term cover work out cheaper than investing through a mutual fund over longer term
investments.
While creating plans for life goals, commitment of ULIP provider to stay throughout life of policy is critical
ULIPs, by virtue of regulation, do not have any call options
morphing itself to cater to needs of simplicity, ease, agility, and as a protector against risks.
New Year resolutions revolve around
sticking to commitments made towards fulfilling cherished goals and dreams
financial plans in a single place while delivering not only value for money, but also peace of mind.
(Author is managing director,
IndiaFirst Life Insurance)
