First introduced in 1971, ULIPs (Unit Linked Insurance Plans) is a very effective financial tool that can provide insurance and investment benefits. Due to high-front loaded fees and other charges by agents and distributors, the acceptance of ULIP got hollow with time. A few evolutions and changes in the past decade made the ULIP policyholders take a sigh of relief. Let’s find out how ULIPs have evolved in the past ten-fifteen years.
The full form of ULIP is Unit Linked Insurance Plan, and it is a multi-faceted life insurance policy. It is a combination of investment and life insurance. If you are a ULIP policyholder, then you will have to make regular premium payments to get life insurance coverage. The remaining fund is pooled with the assets received from all the other policyholders. Then further, they are invested in various financial instruments like equity funds and debt funds. They ensure that you grow your money and get a secured future against emergencies as well.
Changes in ULIPs plan in the last decade
Change in Charges- ULIP has changed a lot over the years and made specific much-needed tweaks to its cost structure. Earlier, the life cover promised by ULIP was five times the annual period; now, it is ten times the annual period. Also, the recurring charges have changed; now, there is a cap on these charges. Additional charges went through a lot of trimming as well. The policy cost is higher in the initial years in ULIP, and there is an even distribution of charges as well.
Changes in lock-in period- A decade ago, the lock-in period of ULIPs was three years which has now changed to five. The increased lock-in period will prove to be very helpful to you as an investor because you will get better returns with more time. Also, if you want to exit after the lock-in period is complete, then you will be exempt from the penalty charges.
Variety of funds- Earlier, the funds that you could find to invest was only a handful. Now you get tonnes of options of funds to choose from. You can choose from an equity fund, conservative fund, long-term bond, or short-term bond, depending on your preference.
More flexibility- When it comes to switching between funds, ULIPs offer more flexibility compared to ULIP ten to fifteen years ago. You can switch from equity funds to debt and vice-versa easily now. Also, ULIPs are more transparent now. Due to their transparency, you also get the option of choosing where you want to invest. For higher and better returns, it is suggested that you select a long-term investment.
Liquidity- Thanks to the evolution, ULIP has the feature to be more liquid than earlier. People invest in bulk for a long duration, so it is possible that they need some amount when an emergency happens. Due to its non-liquidity, in the past, you couldn’t withdraw the money. It was a need to add a liquidity feature in ULIP. Now that they have this feature, it has attracted more and more investors to invest.