ULIP is known for its dual approach, which offers both growth & financial protection, due to its combination of investment & insurance. One part of the premium is diverted towards life coverage,& the remaining part is invested towards market-linked funds. This plan offers flexibility in paying premiums & allocation of funds in different asset classes, such as debt, equity, or both.
While selecting among the different types of ULIP plans available, an investor should assess the desired returns on the basis of risk tolerance level & investment horizon. A ULIP return calculator is an online tool that helps calculate the return value depending on the type of fund, premium amount, & policy tenure. It helps in comparing different plans available & aligning them with the financial objectives.
Characteristics of Different Types of ULIP Funds
| Fund Type | Risk Parameter | Return on Investment | Fund Potential & Volatility Based on Market |
| Liquid Funds | Low | Low | Fund Potential Range: 4.78% to 6.95% |
| Volatility: Low | |||
| Equity Funds | High | High | Fund Potential Range: 20.84% to 34.23% |
| Volatility: High | |||
| Balanced Funds | Medium | Medium | Fund Potential Range: 9.23% to 13.25% |
| Volatility: Medium | |||
| Debt Funds | Medium to low | Low | Fund Potential Range: 8.11% to 14.09% |
| Volatility: High | |||
| Growth Fund | High | High | Fund Potential Range: 8.8% to 19.2% |
| Volatility: High | |||
| Growth Super Fund | High | High | Fund Potential Range: 8.5% to 9.7% |
| Volatility: High | |||
| Bond Funds | Medium | Medium | Fund Potential Range: 8.81% to 10.63% |
| Volatility: Medium | |||
| Conservative Fund | Low | Low | Fund Potential Range: 8.06% to 11.07% |
| Volatility: Low |
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Different Types of ULIP Plans
To find the best ULIP plan in India, it becomes important to know the different types of ULIP plans available like debt, equity, balanced funds, etc. Let us understand the different ULIP plans in detail:
1)Based on Death Benefits
| Parameter | Type 1- ULIP Plans | Type 2- ULIP Plans |
| Death Benefit | In case of an unfortunate event, the nominees receive the higher of the sum assured or the fund value accumulated to date.
For example, the sum assured is INR 40 lakh,& the fund value is INR 50 lakh; the nominee will receive the higher of the two, i.e. INR 50 lakh. |
In case of an unfortunate event, the nominees receive the total of the sum assured & the fund value together, irrespective of the market performance.
For example,if the sum assured is INR 40 lakh & the fund value is INR 50 lakh, the nomineewill receive INR 90 lakh. |
| Lock-in period | 5 years | 5 years |
| Returns | Market-linked returns | Market-linked returns |
| Investment options | Debt, equity, or both | Debt, equity, or both |
| Objective | Guaranteed death benefit payout | Higher returns |
| Sum at Risk | With the increase in the fund value over time, the amount of risk the insurance company faces decreases correspondingly. | With the increase in the fund value over time, the amount of risk the insurance company faces decreases correspondingly. |
| Suitable for | Risk-tolerant investors | Risk-tolerant investors |
2) Based on Investment Funds
a) Debt Funds
- Focus:Investing in debts, bonds, & government securities offers stable returns & preservation of capital.
- Risk:Low-to-moderate
- Suitability:Risk-averse investors, i.e., those who are reluctant to take risks.
b) Equity Funds
- Focus:Investing in stocks offers high growth
- Risk:High, due to being linked to the market.
- Suitability:Aggressive investors, i.e. those who are willing to take risks.
c) Balanced Funds
- Focus:Investing in both debt & equity to get stability & moderate growth.
- Risk:Moderate, depending upon the ratio of allocation between debt & equity.
- Suitability:Moderate-risk investors, i.e. those looking for both stability & moderate growth.
d) Guaranteed Funds
- Focus:They are linked to bank deposit rates with a guaranteed minimum return on the amount invested.
- Risk:Very low, resembles risk-free investments
- Suitability:HighlyRisk-averse investors, i.e., those who prioritise wealth protection over returns.
e) Thematic Funds
- Focus:Meant for specific investments, like particular industries or sectors, such as healthcare, infrastructure, technology, etc.
- Risk:It varies according to the sector opted for &the performance of the market.
- Suitability:Investors having a high-risk appetite & a long-term investment horizon.
3) Based on Wealth-Creation Objectives
a) Guaranteed & Non-Guaranteed Plans
These plans offer guaranteed returns & are best suited for risk-averse investors who are reluctant to take risks.
Under this plan, funds are invested in market-linked investments, which offer high returns & risks. This plan best suits investors who look for high risk & a long investment horizon.
b) Single & Regular Premium Plans
Under this plan, premiums are paid in a lump sum. This plan requires a one-time investment to reduce administrative costs & is considered flexible.
This plan requires a small but regular payment of premium, i.e. monthly or annually.
c) Life-Staged & Non-Life Staged Plans
This plan customises the investment according to the milestones of life, i.e. different life stages. The funds are allocated depending on the age of the investor who seeks dynamic adjustments & convenience.
This plan requires investment throughout the policy tenure, where funds are allocated on a manual basis according to the risk-tolerance level & objectives.
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Conclusion
ULIPs are considered one of the most preferred financial instruments, providing flexibility & a variety of benefits for investors. By understanding the different types of ULIP plans & their investment options, one can make an informed decision about choosing the plan that best suits their financial requirements & risk acceptance level. Whether you opt for Type 1 or Type 2 of ULIP plans, you will always be provided with an option to customise the plan according to your financial needs & objectives.