ULIP vs. Term Insurance – The Big Debate
“ Never mix investment with insurance” Mostly we are fimiliar with this quote and advice by the expert. Even many of us swear by it.
As we know that insurance’s product have different pros and cons, Every Insurance buyer faces the problem over for making a right choice to choose a right product. This type of problems can only be solved by debating over it. One of those debate is called Term Insurance and ULIPs. Many of the expert recomends Term Insurance via their newspaper column and their Private Blogs. While some of them also suggest that if a person is looking for a policy which might act as both I.e investment and Insurance, ULIP will be a better option for them.
While both have their up and down,s. the Term insurance is being covered by every investment guru. But should we stand in a same line like other peoples do?
Absolutely not! It is very much important to examine each side of a plan which we are going to choose. In order to make these things easier to you, here we are discussing the important and necessary facts of Term’s insurance and Unit Linked Insurance Policy. we hope it will help us choosing whats right for us.
ULIPs or Unit Linked Insurance Policy
ULIPs which is also called unit linked insurance plan is a combination of insurance and investments both. In ULIPs, one side of the premium is paid towards the insurance which is called motality charge while the other side is invested in different sides parts of different investment options which are market funds, bonds, debts, Owner’s Equities, and may be hybrid. The selection of these funds is upto your choice.
On papers, ULIPs are very much often considered as one of those plan which is too good to be true. Investment Flexibility and fund’s switching are of the highlights of ULIPs. In Simple, it means that we can choose any of the funds in which we want to invest in and can easily switch between the options which are mentioned above. These transfer of accumulated funds are smooth and doesn’t lead to any of the ramifications of tax.
But However, the number of free switches are limited and may vary from insurer to insurer. As we know that the purpose of ULIP’s is likely to invest and insure so in order to keep the relation with it. You might need to pay the additional charges like admistration charges, funds management charges, and policy mortality charges.
Term Insurance: What Makes it More Attractice?
The Term Insurance is a known as a pure death benefit plan. In a very simple words, this assures your’s family financial security in case of your death. It also serves as an income replacement tool at your undue death at an affordable premium. As it has no investment components, it also covers your nominee for the the duration of policy without any changes in its premium. This premium’s benefit can be more enhanced by clubbing the basic policy with notable add ons which are waiver of premium, Accidental death benefit, return premium and critical illness rider etc.
This policy duration varies between 5 years to 40 years. If in case you are not able to pay the premium’s due doesn’t matter what the reason is, your cover will be ceased. You will not get to any of it’s benefit in that case. Therefore it is very much important to pick a premium plan that we can afford in a long term run throughout the policy tenure.
|Type||Insurance + Investment||Only Insurance|
|Ideal forInvestment||Any one who can invest in long term||Only families having bread winner’s absence|
|Charges||Agent fees, funds switching, policy administation, funds allocation charges||No Charges|
|Ideal tim to buy||Can be buy at any time||Between the age of 25 to 35 year|
|Lock in Period||At least 3 years to 5 years||Between the age 25 to 35 years|
|Security||Not Secure||Highly Secure|
|Switching Option||Switching allowed between packges||No Switching allowed|
Right Now, We know the comparison between the term insurance and ULIPs is likely comparing a chalk and a chees. Both are insurance products but with different purposes. Always choose the one that matches your financial goals and priorities.