Insurance companies have different insurance plans for customer. One of such plans that have been introduced some years back is Unit linked insurance plan or UILP. ULIP is a market linked portfolio where major portion of money invested into these plans will be exposed to market risk. These insurance companies have tried to combine both safety of insurance protection and wealth creation.
One portion of your money invested in ULIP goes towards providing life cover and the balance portion invested in share market through a fund. ULIP may give you good return if underlying fund performs well. If market started its downward journey like it did before then you lose your invested money.
Mutual Fund or ULIP – Which one to select
Here are certain points because of which we suggest you to go for mutual fund instead of ULIP;
- Generally ULIP is invested in low risk products to secure the assured sum of the insurance that customer has taken. In case of mutual fund, you have different variety to invest. Some mutual funds are purely equity oriented and some others are balance i.e. debt plus equity.
- Insurance companies have lock in period for ULIP within which you cannot sell it or surrender it. General Lock in period is 3 to 5 years depending on the ULIP product. Whereas, you can buy and sell open end mutual funds anytime based on your requirement. Because of this reason mutual funds are more liquid that ULIP.
- Charges for ULIP products are higher compare to mutual funds.
If you want to invest in a product that is market linked then we suggest you to go for mutual fund as it’s a pure investment product managed by professional fund manager.
For an insurance product we suggest you to invest in any term plan which is purely an insurance product where your family member gets a large sum in case of any eventuality.