Types of Insurance Plans - Traditional or Unit Linked

Insurance Plans - At a glance

Broadly, insurance plans can be distinctly divided into ULIP (Unit Linked Insurance Plans) and traditional plans. A brief detail of both segments:

Unit Linked Insurance Product

ULIPs have gained high acceptance due to attractive features they offer. These include:

1. Flexibility
   1. Flexibility to choose Sum Assured.
   2. Flexibility to choose premium amount.
   3. Option to change level of Premium /Sum Assured even after the plan has started.
   4. Flexibility to change asset allocation by switching between funds.
2. Transparency
   1. Charges in the plan & net amount invested are known to the customer.
   2. Convenience of tracking one’s investment performance on a daily basis.
3. Liquidity
   1. Option to withdraw money after few years (comfort required in case of exigency).
   2. Low minimum tenure.
   3. Partial / Systematic withdrawal allowed
4. Fund Options
   1. A choice of funds (ranging from equity, debt, cash or a combination).
   2. Option to choose your fund mix based on desired asset allocation.

Traditional Plans

These are the oldest types of plans available. These plans cater to customers with a low risk appetite. Some of the common features of traditional plans are:

1. Steady Investment
   1. Major chunk of investible funds are in debt instruments.
   2. Steady and almost assured returns over the long term.
2. Features
   1. Death benefit is Sum Assured + guaranteed & vested bonus.
   2. Helps in asset creation as they are for a long tenure.
   3. Premium to Sum Assured ratios are fixed for each plan and age.
   4. Generally withdrawals are not allowed before maturity.