Types of Unit Linked Insurance Plans

There are several types of Unit Linked Insurance Plans or Unit Linked Insurance Products. Let's discuss it below. 

Types of Unit Link Insurance Plans

1. Equity

   In this type of Unit Linked Insurance Plan, the amount you invest is utilized towards buying equity shares of different companies. Therefore, this Unit Link Insurance Product is considered risky as the investments are linked to fluctuations in the financial market. Nevertheless, there is also a high possibility for growth in this kind of ULIP. Therefore, equity is an ideal ULIP for risk-friendly investors who expect high returns.

2. Liquid funds

   A liquid fund is a perfect type of Unit Linked Insurance Plan for those with low-risk tolerance. Liquid funds meet the short-term goal of investors as the maturity period of this Unit Link Insurance product varies from weeks to a few months. On top of that, it is believed to be strong credit ratings which further make it a low-risk investment for investors. The funds in this ULIP are invested in money markets such as call money, treasury bills, or certificate of deposit (CD).

3. Debt

   The funds in this type of Unit Linked Insurance Plan go into debt instruments such as government bonds, debentures, securities, fixed-income bonds, corporate bonds, etc. Debt ULIP involves medium to low risk, and the investor gets moderate returns. 

4. Balanced Funds

   In order to lower the risk and increase the returns, some Unit Link Insurance Products invest in both equity and debt instrument. These investments are divided into two proportions. The first goes to equity, and the another gets invested in debt instruments. Although, the risk involved in this type of Unit Linked Insurance Plan is lower than the pure equity plan. 

5. Guaranteed & Non-Guarantee Plans

   Under a guaranteed type of Unit Linked Insurance Plan, the investor enjoys a better return over long-term investments. If the purpose of the investor is saving, then guaranteed ULIP would be an ideal choice as the policyholder gets negligible exposure to equity funds.

   Under Non-Guarantee Unit Link Insurance Products, investors get better exposure to equity funds. As a result, the investor has a high probability of growth if the investor's primary goal is to create wealth. In addition, a range of funds options is available for the investor to choose from. 

6. Single and Regular premium

   Under the single premium type of Unit Linked Insurance Plan, the investor must pay the premium only once while purchasing the Unit Link Insurance Product. 

   On the other hand, the investor must frequently pay premium charges based on the regular type of Unit Linked Insurance Plan. The investor may choose a monthly, quarterly, or annual plan to pay the premium. 

7. Cash Funds

   This type of Unit Linked Insurance Plan is ideal for risk-averse individuals. The risk factor is insignificant in this type of ULIP. However, the returns are also the lowest among other Unit Link Insurance products.

8. Life-staged ULIPs

   Under this type of Unit Linked Insurance Plan, the risk factor of the investor decreases as they grow older. At the initial stage, a high proportion of investment goes into equity, and the minimum portion goes into debt. As the investor ages, more investments go into debt instruments and less carries equity. 

Conclusion

The categories of Unit Link Insurance Products show how you can determine a particular type of Unit Linked Insurance Plan based on your risk appetite and financial planning. For example, you can opt for a risky one and go for equity funds or debt in order to reduce the risk. At the same time, various other alternatives are also available.

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