Definition of Terms
Term
ULIP
raagvamd, RaagVamdatt |
It is the acronym or short form for Unit Linked Insurance Plan. This is a kind of life insurance plan.
The premium paid for a ULIP is partly used to secure insurance for the life of the person, and partly used as investment for generating returns. Due to this, the premium for ULIP is significantly higher than that for a Term Plan for the same amount of sum insured.
Since this is an insurance plus investment type of plan, an amount equal to the sum insured plus the accumulated bonuses (earned out of the investments made using part of the premium) is paid to the insured person if he survives the tenure of the policy. If the insured person expires during the tenure of the policy, the sum insured plus the accumulated bonuses is paid to the nominee.
Difference between ULIP and Endowment Plan:
In an Endowment Plan, the insurance company has the full freedom to make the decision about where to invest the money. Also, this process is not very transparent.
As opposed to this, in a ULIP, an investor can choose where his money would be invested (through growth, balanced, conservative, etc options). This results in more control and transparency.
Thus, a ULIP is like a combination of insurance and a mutual fund.
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