UNIT LINKED INSURANCE PLANS

Till recently individuals seeking to provide protection to their family had no other option except a life insurance term plan. The plan promised a stipulated amount to the family of the policy holder in the event of his death.

However, the insurance sector has evolved over the last few years and a number of innovative products have hit the market. One product category that is increasingly catching the fancy of individuals is the Unit Linked Insurance Plan (ULIP). These plans, a combination of insurance and investment, provide the policy holder with life cover and additionally offer the opportunity to earn a return on premium paid.

HOW ULIP WORKS
ULIP's work on the lines of mutual funds. The premium paid by the investor (less any charge) is used to buy units in various funds (aggressive, balanced orconservative) floated by the insurance companies. Units are bought according to the plan chosen by the policy holder. On every additional premium, more units are allotted to his fund. The policyholder can also switch among the funds as and when he desires. While some companies allow any number of free switches to policy holder, some restrict the number to just three or four. If the number is levied.

Individuals can also make additional investments (besides premium) from time to time to increase the saving component in their plan. This facility is termed "top - up". The money parked in ULIP plan is returned either on the insured's death or in the event of maturity of policy. In case of the insured's untimely death, the amount of that beneficiary paid is higher than the sum assured (insurance cover) or the value of the units (investments). However some schemes pay the sum assured plus the prevailing value of the investments.

MARKET LINKED RETURNS
Though there are various benefits attached to buying a unit linked insurance product, the return on the ULIP's is directly linked to the performance of the stocks or bonds it invests in. an investor must be prepared for bullish as well as bearish market conditions.

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