While investing in life insurance, individuals might wonder why these products are not outlined in a way that allows them to take advantage of the market. Here, the Unit Linked Insurance Plan (ULIP) comes to play a crucial role.
ULIP is a life insurance product where investors can invest under a single integrated plan. Here, investors have to take the risk cover of a policy. On the other hand, they can invest in different investment instruments such as bonds, stocks, and mutual funds. In this type of investment, investors get the chance to monitor their portfolios. However, they have to bear the market risk associated with these funds.
ULIP consists of funds like equity funds, income/fixed interest/bonds, balanced funds and cash funds. The risk factor varies with each fund. Remember, ULIPs are extremely flexible, and the return from this investment instrument will depend on the income objective and risk appetite of the investor.
On an endnote, it can be said that both life insurance and mutual funds come with pros and cons. While life insurance offers financial securities, mutual funds offer decent returns. It is the objective and risk appetite that helps individuals understand thedifference between a mutual fund and life insuranceand choose the right investment instrument.
If investors cannot choose between the two, yet want to leverage the advantageous features of both these investment options, they can opt for ULIP. Thus, getting security just like a life insurance policy and benefits from the financial market similar to that of a mutual fund can be a lot easier.
