The insurance and investments industry has never been what it was many years ago and has produced products that have proven to be of huge benefits to today’s sophisticated investors. This is a version of the traditional ULIP products which have been developed based on the modern world economy 4G ULIP Plan for example. In this blog, “What is ULIP” is described and explained along with why they should be considered.
What is ULIP?
A ULIP being a linked insurance product is a kind of mixture of life insurance and investment products. They are the combination of insurance and investment, when you pay money for a ULIP policy then a portion of that money goes for buying the life coverage and the balance is either invested in equity funds or debt funds or balance funds depending on the risk appetite and financial goal of the respective individual.
What’s the difference in 4G ULIP Plans?
ULIP Plan is a new product offering that has many more benefits than the traditional one it offers 4G benefits. Here is why it is different:
- More Flexibility: In 4G ULIPs, the fund transfer is free; therefore the specific portfolio according to the condition in the market is more effective. The investor has the discretion to classify funds as equity, debt and hybrid in a manner that suits the investment goal of the investor.
- Lower Costs: Although they generally involve low charges, such as premium allocation costs and fund management fees. However, some of the providers also have no allocation costs and thus the later 4G ULIPs are less costly than the former ones.
- Comprehensive Cover: Now, with the help of the 4G ULIP Plan, you get a life insurance cover with the element of potential wealth creation built into the product, which makes it a far more potent financial tool.
- Tax Benefits: Like the normal ULIP, 4G ULIP is also given tax advantages under the Section 80C, of the Income Tax Act.
- Goal-Driven Plans: These are plans suitable for you in case you would wish to save for your child education fund or even the house or saving for your retirement.
- Wealth Generation: The Market-linked funds 4G ULIPs have the possibility of providing returns over and above the time cycle.
- Transparency: Every charge, fund performance and all the other necessary matters are explained in detail in presenting these plans to the policyholder which helps the policyholder in decision-making.
- Long-Term Benefits: Investing in a 4G ULIP Plan for long-term benefits gives you better results along with the benefit of compounding.
ULIP vs Term Insurance
Refer to the below given table to understand the ULIP vs Term Insurance difference:
| Feature
|
ULIP | Term Insurance |
| Purpose | ULIPs are a mix of investment and life protection. It is ideal for those looking for wealth creation along with life protection. | Term Insurance is a pure protection product as it would provide financial security to the policyholder’s family in case of untimely death.
|
| Costs of Premiums | ULIPs have higher premiums as a part of it is invested. | Term insurance plans have lower premiums since they provide only life cover. |
| Returns | ULIPs, however, provide market-linked returns, which can be massive over a long-term horizon. | Term insurance provides no returns if the policyholder survives the tenure. |
| Flexibility | ULIPs enable fund switching, thereby providing greater control over investments. | Term insurance does not have an investment component, hence no fund switching is available. |
To whom 4G ULIP is ideal?
The 4G ULIP Plan is ideal for:
- Young Professionals: These products can be helpful for people with the first experience in money management because of the perspective for creating wealth in the long term and having life insurance.
- Goal-Oriented Investors: But if you are committed to certain financial targets, for example, buying a home or paying for your child’s college education 4G ULIPs will assist you in achieving your targets.
- Market-Savvy Investors: If you are alright with having market-linked products and you want to have a portfolio of your choice then 4G ULIPs will be beneficial to you.
What Every User Should Know about 4G ULIP Plan
- Know the Fees: However, 4G ULIPs cost less they still should all be known and understood.
- Know Your Funds: Identifying the fund’s present, records is essential to determine how they will be useful in your financial needs.
- Review the Insurance Component: Life insurance should be enough as to meet family needs.
- Prepare for Market Risks: Bangladesh being an emerging market, the return is largely influenced by the market and since ULIPs are market-linked products, the return is unfair from the market.
- Invest for Long-term: For best returns, it is recommended that one should remain invested so that equity exposure continues till the end of the said term.
Conclusion
4G ULIP Plan: This particular product ranks among the most unique products in the market because it combines insurance and investment. It provides unparalleled freedom, lesser expenses, and a constructive purpose to fulfil the demands of the new-age investors. While it has the benefits of wealth creation & life protection before selecting this plan one has to understand the financial goals & Tolerance for risk.
