Pros and cons of ULIP plan
In the world of investment ULIP is a common term used by people these days. In this modern world where investment and banking are playing a huge role in everyone’s life,each and every person should have a basic knowledge about investment policies and banking,and also the difference between investment and insurance. Investment is that particular field where a person can invest his money for a return in his life time,but in insurance an insurer (the insurance company) and the insured(the person) are tied up by a contract where the insured pay an amount to the insurer as compensation if any accident or unexpected incident occurs.
An insurance policy can only ensure our life but Unit Linked Insurance Plan(ULIP)is the one insurance policy in which we can get the insurance for our life as well as we can get the returns for our investments because in ULIP the premium amount we pay is invested in stock market by the company and returns better income on maturity period for this. In India investments in ULIP are covered under Section 80C of IT Act. The concept of having an investment is governed by the Insurance Regulatory and Development Authority (IRDA).
Structurally both ULIP and Mutual Funds look same but Mutual Funds is quite a good option if it is for a 5yr or even shorter time ,as ULIP has a high first year charges,but if someone is planning for long time investment then ULIP has an edge because in ULIP though it has high first year charges towards acquisition,including agents’ commission but in long term ULIP policy holder’s premium comes on regular basis so it’s easy for managers to invest the money in a systematic way in the market,whereas mutual fund managers have many investors and they can move their money in and out from any scheme at a short notice.
So in the end if some one is planning for long time investments ,then he/ she must have an ULIP because at the end of the maturity he would get more money from ULIP than Mutual Funds.
It is true that most of us do not have proper idea about investment plans, insurance covers. So it becomes difficult for us while choosing the correct investment plan or the best insurance coverage. However this post has clarified the matter; such information guide people to get the best deal out there.
ULIP plans are definitely the best place to invest your money in. Mostly while investing people look for maximum return on their investments. So if ULIP is able to give you that as compared to mutual funds then the wiser decision would be to go for ULIP. I am curious to know what kind of plan would be ideal for short term investment.
We should invest in schemes that give us the maximum amount of benefit. Financial blogs, investment blogs have useful information that could help you make the right choices while investing. But before investing learn about the market condition, also assess the risk factors.