What Is a Unit Linked Insurance Plan?

A unit linked insurance plan (ULIP) is an investment product that provides for insurance payout benefits. ULIP offerings are primarily concentrated in India. The investment vehicle requires a premium payment which is invested in investment products for capital appreciation. 

Understanding Unit Linked Insurance Plans

A unit linked insurance plan can be utilized for various benefit payouts including life insurance, retirement, education and more. A ULIP offers varying provisions to the investor as benefits. A ULIP is typically opened by an investor seeking to provide coverage for beneficiaries. It is paid into by the owner in the form of premiums, with the intention of the plan’s worth to be paid out at a specified time frame for a specific purpose. With a life insurance ULIP, the beneficiary would receive payments following the owner’s death. Plans can include varying provisions for triggering payments.

A unit linked insurance plan’s investment options are structured similar to a mutual fund. The assets in a ULIP vehicle are managed to a specified objective. The vehicle calculates a daily net asset value. The vehicle is market-linked and appreciates with increasing share value. When an investor purchases units in a ULIP, he or she is purchasing units along with a larger number of investors, just like an investor would purchase units in a mutual fund. Different ULIPs offer different qualified investments. Investors can buy shares in a single strategy or diversify their investments across multiple market-linked ULIP funds.

ULIPs require a premium. Premiums vary with the terms of each ULIP. An initial lump sum is typically required along with annual, semi-annual, or monthly premium payments. Premium payments are proportionally invested towards specified coverage and in the designated investments.

Unit linked insurance plan investors can make changes to their fund preferences throughout the duration of their investment. The funds offer transferring flexibility. Numerous investment options are also available including stock funds, bond funds, and diversified funds.

Unit linked insurance plans allow for the coverage of an insurance policy with premium payments allocated to funds that are expected to increase at market rates over time. Be sure to read the plan's prospectus before purchasing any ULIP.

ULIP Investments

ULIP investment offerings are primarily concentrated in India where they were first launched. HDFC Life is a leading provider of ULIP investments. The firm’s plans offer varying provisions, terms and investment options. Other ULIP providers include Aegon Life, PNB MetLife, Kotak Life, ICICI, IndiaFirst, SBI Life, and IDBI Federal.