All investment instruments have their unique set of advantages to offer. It is vital for investors to be aware of the nuances in a particular offering and make informed decisions.

When investing in a Unit Linked Insurance Plan, popularly called ULIP, it is to be borne in mind that ULIP’s being a market linked instrument will fetch good returns on a long term basis. The basic advantage of a ULIP over other investment instruments is that it offers the twin benefits of life insurance as well as an investment. Apart from that, there are a number of ways in which ULIP’s can prove to be advantageous over Mutual Funds, Regular Insurance Policies and Fixed Deposits. Let’s analyze:

ULIP vs MUTUAL FUND


Flexibility on Mode of Investment/investment amounts

ULIP provide the flexibility to alter the premium amounts during the policy’s tenure. Surplus funds can be used to enhance the contribution thereby ensuring that the funds are gainfully invested. Alternatively, lower payments can be made when faced with a liquidity crunch (the difference being adjusted in the accumulated value of the ULIP). This option of modifying premium payments at one’s convenience clearly gives ULIP an edge over Mutual Funds.


The cost factor for altering Asset Allocation

In Mutual Funds, shifting the corpus into a debt from the same fund house will involve an exit load and/or entry load.

On the other hand, in a ULIP, the option to invest across asset classes as per your convenience is very cost-effective. Most insurance companies allow shifting the investments across various plans/asset classes either at a nominal or no cost.

This can prove to be very useful. For example, in a bull market when the ULIP investor’s equity component has appreciated, he can book profits by simply transferring the requisite amount to a debt-oriented plan.

3. Tax Benefits

ULIP’s qualify for tax benefits under Section 80C of the Income Tax Act. This holds good for any kind of plan chosen by the investor.

In Mutual Funds, only investments in tax-saving funds (also referred to as equity-linked savings schemes) are eligible for Section 80C benefits.

ULIP vs REGULAR INSURANCE POLICY

ULIP’s and Traditional policies both work alike. A part of the premium is set aside for life cover and the rest is invested in a fund after deducting charges.

The main advantage of a ULIP is that the investor knows exactly about the break-up of his premium into life cover, the fees being paid and the amount being invested in a fund. The performance of the funds can also be tracked as the returns are linked to the market performance.

On the other hand, in traditional policies, no information about the break-up of charges is shared with the investor. He also does not know whether the bonuses paid to him every year are all that his fund has made or whether the company is giving him only a share of the profits.

Policies encourage savings whereas ULIPs take the investment path and hence have higher growth options.

ULIP vs FIXED DEPOSIT

There is always a degree of risk, however small, involved in a ULIP. Traditionally, investors preferred investing in safer instruments like Fixed Deposits, despite the lower returns. But Fixed Deposits are able to only beat the inflation.

On the other hand a ULIP is a market-linked plan with an equity exposure. A plan with an equity exposure for a long term usually consistently gives better returns than any other asset like Fixed Deposit or Bonds.

Why Choose Bajaj Allianz iGain as your ULIP plan?


iGAin is India’s 1st completely online Ulip. It does not have an intermediary – you are the sole beneficiary.
iGain is a market linked plan that offers market exposure with built-in investment advice. For those who find investing and insuring as Greek and Latin, there is the Wheel Of Life Portfolio Strategy. iGain’s investment officers will select and invest in the appropriate funds to balance and safeguard your investment.
From the 11th year onwards, iGain increases the allocation of units by 2% to enhance your investments. So while you pay a 100% premium, 102% of it is invested.

For information on Bajaj Allianz’s insurance products, www.buyigain.com

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