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Difference between ULIPs and Traditional Plans

By Finserv MARKETS - Feb 25,2019
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ULIP vs Traditional plans

Different people invest in products like insurance for different reasons. Depending on your personal goals, you may invest to earn good returns, secure your future, or create wealth to help you fulfil your financial needs and requirements. Broadly, irrespective of your goals, there are two types of insurance plans that you can use: Unit-Linked Insurance Plans or Traditional Plans. Both come with their own benefits, hence, it can be difficult to decide which option is best suited for your financial goals.

Here, we’ll take a closer look at both these investment options to help you better understand and make an informed decision.

What is a ULIP?

A Unit-Linked Insurance Plan is a market-linked product. ULIP benefits include the dual benefit of a life insurance cover as well as an investment. A portion of the premium is used to provide life cover, while the rest of the money is invested in a mix of equity and debt instruments based on your risk appetite and life stage goals. At the end of the policy term, the investor is provided with the returns on the investment.

What is a Traditional Plan?

Traditional plans include term plans, endowment plans and life insurance policies. Traditional policies are considered risk-free, as they provide fixed returns in case of death or maturity of the term.

Which is Better?

Let’s see whether endowment plans or ULIP plans are an ideal option for you.

1. Investment Options

With a unit linked insurance plan, you have complete control over where your money is being invested. You can choose to invest 100% of your money in equity, debt or balanced funds.

On the other hand, traditional plans don’t allow you to choose investment avenues.

2.Transparency

When you have a unit linked insurance plan, you are completely aware of how much money is being invested and what kind of market instruments it is being invested in. Additionally, you will receive regular updates about how your investment is doing.

In traditional plans you are informed about what you will receive on maturity.

3.Withdrawals

ULIPs plans are flexible in the sense that there are multiple withdrawal options as per the convenience of the plan owner. This allows for greater financial flexibility during times of need. The same option is not available for traditional plans.

4. Charges

There are certain charges associated with ULIPs. However, these are always mentioned right at the onset. You can choose to go with investment plans available on Finserv MARKETS that have no premium allocation charges attached.
Sadly, with traditional plans, there is no clarity on the charges.

Now that you have all the information regarding the two types of investments, you can make an informed decision based on your personal financial goals. As with any investment opportunity, make sure you do a little research before you decide on the best ULIP plans or endowment plans to fulfil your needs and requirements.

“Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!”

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522