THE BSE Sensex might be rising or sinking but the common investor in Uttar Pradesh is displaying keen interest in being part of the stocks mania—albeit indirectly. In the Insurance sector, Unit Linked Insurance Plans (ULIPs) have emerged as one of the favourite investment avenues. Reason? The ULIP plans provide the twin option of life risk cover and the prospect of investing in securities.
“With ULIP, an investor has the opportunity of choosing a fund with the convenience of having a direct stake in the performance of the financial markets”, Bajaj Allianz Life Insurance Co Ltd senior area manager S N Mohapatra.
He said that ULIP plans invest premia paid in a fund or funds of the investor’s choice (depending upon the allocation rate) and the units are allocated to the investor depending upon the price of units for a fund or funds. The value of an insurance policy is the total number of units that one holds in a fund or funds.
The insurance cover and administration charges are deducted through cancellation of units, he said.
The general benefits of a ULIP plan of most insurance products are—death benefit, cash withdrawal option, premium apportionment (one can change the amount of premium paid in a plan), value of units and premium payment mode (yearly, half yearly and quarterly).
Most ULIP plans offer the flexibility of full or partial withdrawal by surrendering units anytime after the investor for instance had paid three years of full premium. The surrenders are paid out at the current market value of the units, Mahapatra said.
{{/usCountry}}Most ULIP plans offer the flexibility of full or partial withdrawal by surrendering units anytime after the investor for instance had paid three years of full premium. The surrenders are paid out at the current market value of the units, Mahapatra said.
{{/usCountry}}The pure insurance products are slowly becoming unpopular as investors have started looking for quick returns. This is one of the reason why ULIP plans are becoming popular in Uttar Pradesh as everybody is in a hurry to be part of the stock market, he said.
The biggest gain for ULIP holders is that it also provides an option for the investor to nominate beneficiaries so that in case of the holder of the policy dying prematurely, the policy proceeds would be offered to the nominee. One can also change the nominee during the lifetime of the policy, Mahapatra added.