what is a unit linked insurance plan ulip 
a unit linked insurance plan ulip is a multi faceted product that offers both insurance coverage and investment exposure in equities or bonds this product requires policyholders to make regular premium payments part of the premiums goes toward insurance coverage while the remaining portion is pooled with assets from other policyholders and invested in either equities bonds or a combination of both understanding unit linked insurance plans ulips a unit linked insurance plan can be used for various purposes including providing life insurance building wealth generating retirement income and paying for the educations of children and grandchildren in many cases an investor opens a ulip to provide benefits to their descendants with a life insurance ulip the beneficiaries would receive payments following the owner s death a unit linked insurance plan s investment options are structured much like mutual funds in that they pool investments with those from other investors as such a ulip s assets are managed with an eye toward accomplishing a specified investment objective investors can buy shares in a single strategy or diversify their investments across multiple market linked ulip funds investing in a unit linked insurance planpolicyholders must commit an initial lump sum payment when they first buy into a ulip followed by annual semi annual or monthly premium payments although the premium payment obligations vary from product to product in all cases they are proportionally directed towards a designated investment mandate the regular premium payments enable policyholders to systematically build up principal more quickly than could be accomplished by waiting for returns to accumulate in addition many ulips offer the option of topping up or adding significant lump sums to the balance even though ulips are partly an insurance product a focus on exposure to equities in the investment side of the product can raise investor risk ulips are unique in that they offer flexibility to investors who may adjust their fund preferences throughout the duration of their investment for example they can shuttle between stock funds bond funds and diversified funds depending on their investment needs advantages and disadvantages of ulipsthe obvious benefit of ulips is the dual coverage ulips provide both investment and insurance benefits the life insurance portion of the premium is paid in part and the remaining amount is invested in equity debt or a combination of the two ulips provide flexibility in the form of premium payment alternatives investment possibilities and fund switching as investors can select the investment option that best fits their investing objectives and risk tolerance because ulips are created with long term investment objectives in mind they aid in building wealth over the long term ulips have the potential to provide larger returns than conventional insurance plans because they invest in equities and debt securities in addition investors can set a policy and have auto withdrawals automatically deposited into the plan to ensure long term contributions following a predetermined lock in period ulips offer the option of partial withdrawal this enables investors to take care of their urgent demands without giving up their policy entirely in addition depending on the state of the market and your investing objectives ulips give you the choice of moving between funds as a result investors can transfer funds without terminating their insurance policies despite its flexibility there are some downsides to ulips charges for premium allocation policy administration and fund management are among the high fees associated with ulips the returns on the investment may be greatly impacted by these ongoing recurring charges ulips make investments in debt and equity securities both of which are exposed to market risks there is no assurance of returns and the investment s value may change based on market conditions like any other investment there is the potential to lose capital contributed to the plan sometimes you can t touch the ulip balance for a period of time for instance a 5 year lock in term for ulips prohibits investors from taking their money out before the period has ended if investors require the money before the lock in period is through they may not have the flexibility they need alternatively investors who choose to terminate their ulip before the lock in period is up can be required to pay exit fees last for investors who demand a higher degree of insurance coverage the insurance component of ulips might not be adequate investors might need to get more insurance coverage in such circumstances thereby not having their entire need by a single ulip alone offers the benefit of both insurance and investmentsmay offer flexibility in the investments that can be chosen