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The benefits of investing in a Ulip

The simple structure and dual nature of unit-linked insurance plans work to women's advantage. They not only get life cover, but also gain from the stock market.

Print Edition: January 22, 2009

• Consider your time frame, anticipated needs and risk-taking capacity, and then choose a Ulip.
• Select a flexible plan that allows you to moderate your risk appetite as you age.
• Taper off the equity exposure in a Ulip as you approach retirement.

Most of us assume that we will continue to live comfortably on the salaries we earn. But if the breadwinner dies, how will the family survive? What about the accumulated assets, especially if they are on loan? More importantly, what if the woman is the sole earner?

Life insurance can be a good investment tool, an important addition to any financial plan designed to help the family meet its current or future needs. It can help cover the immediate expenses and provide long-term protection of the assets earmarked for the family's future.

For women, who are less interested in complicated financial products, unit-linked insurance plans or Ulips are good options. For, besides a life cover, they offer advantage of the upside of the stock market. These are long-term products, wherein money is invested in a systematic manner over a period of time. The length of the tenure ensures that the investors enjoy the benefits of compounding. For women, who tend to be passive investors, such a product means they can get the best of both worlds. The product offers the policyholder the sum assured and the fund value, so that she receives at least one, when required.

Another advantage of Ulips is the switch feature. This enables the policyholders to adjust their asset allocation between debt and equity depending on their life stage, risk appetite and the market conditions. These swaps can be made any number of times at zero or nominal cost. For instance, if you have just started your career and have 30-40 working years till you retire, a higher exposure to stocks is good. But as you approach retirement, your risk appetite may decrease and so should your equity exposure.

To help the customers, especially housewives who are not financially clued in, understand the complexities of Ulips, Irda, the life insurance regulatory body, has laid out strict guidelines.

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