ULIP V/S Traditional Insurance.

Types of Insurance Plans - Traditional Life Insurance or Unit Linked Insurance Plan

Insurance Plans - At a glance

Broadly, insurance plans can be distinctly divided into ULIPs and traditional plans. A brief detail of both segments:

Unit Linked Insurance Product

ULIPs have gained high acceptance due to attractive features they offer. These include:

1. Flexibility

1. Flexibility to choose Sum Assured.

2. Flexibility to choose premium amount.

3. Option to change level of Premium /Sum Assured even after the plan has started.

4. Flexibility to change asset allocation by switching between funds

2. Transparency

1. Charges in the plan & net amount invested are known to the customer

2. Convenience of tracking one’s investment performance on a daily basis.

3. Liquidity

1. Option to withdraw money after few years (comfort required in case of exigency)

2. Low minimum tenure.

3. Partial / Systematic withdrawal allowed

4. Fund Options

1. A choice of funds (ranging from equity, debt, cash or a combination)

2. Option to choose your fund mix based on desired asset allocation

Traditional Plans

These are the oldest types of plans available. These plans cater to customers with a low risk appetite. Some of the common features of traditional plans are:

1. Steady Investment

1. Major chunk of investible funds are in debt instruments

2. Steady and almost assured returns over the long term

2. Features

1. Death benefit is Sum Assured + guaranteed & vested bonus

2. Helps in asset creation as they are for a long tenure

3. Premium to Sum Assured ratios are fixed for each plan and age.

4. Generally withdrawals are not allowed before maturity

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