Over the last few years, the urban Indian’s financial portfolio has been undergoing large changes. While earlier we used to set our expectations on tangible investments like Gold, Real Estate, and FDs, we are now moving away from those investments and going for more abstract investments like Mutual Funds, Equities, and PPFs.
While the Mutual Fund industry has marketed their products intensely, the market-linked product that the Insurance industry has to offer, named Unit-Linked Insurance Plans (ULIPs), enjoys a poor reputation in comparison. Earlier, neither the insurance companies nor their customers were comfortable with an insurance product that could be used as an investment.
However, a lot has changed over the years. These products are not only more transparent today but are also the perfect combination of insurance and investments. They give the same returns as mutual funds while also having advantages such as tax savings, life cover for your family, lower fund-management charges, and others that mutual funds do not provide.
In this piece, we have debunked a few myths that still persist about ULIPs.
Myth 1: ULIPs deduct considerable amounts from your investments
ULIPs today are advertised and sold online, which helps in reducing costs because of low customer acquisition costs as well as no agent commissions. Additionally, IRDAI has put a cap on fund-management charges.
Myth 2: ULIPs have high fund-management charges
ULIPs have 5-year lock-ins, which result in lower fund-management charges. The logic being that a fund manager for mutual funds has to generate profits in the short term, whereas the same job for a ULIP is done with the comfort of having at least 5 years to make money systematically and steadily.
Myth 3: A combo of term insurance and mutual funds are better than ULIPs
ULIPs hold the same weight in the share market as mutual funds. Crafted to be share market investment products, its life insurance pay-outs are more along the lines of “additional value” rather than being the main purpose of the plan. A massive pay-out is possible if you opt for a high sum assured and invest your money in safe funds.
Moreover, term plans are not investments since they have no inherent value. And, while an investment in mutual funds offers quick profits, it is a short-term commitment that comes with additional burdens such as high risks and management hassles.
Myth 4: Insurance is an expense; it should be treated as one
This was true 10 years ago when the Insurance industry had simple products to protect families from financial burdens. Insurance companies now offer holistic products, which on their own are enough to build a strong financial portfolio.
To conclude, ULIPs today have become all-rounder plans that are a must-have if you are looking to build a strong portfolio. ULIPs are now available integrated as child plans, money-back plans, and other plans. These plans can rightfully be termed as “evolved”.
To speak to ULIPs experts, contact OneInsure at 86559-86559 or firstname.lastname@example.org.
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