Confused between ulip and term insurance? Read this to know the difference between unit linked insurance plan and term insurance plans
Difference Between ULIP Insurance And Term Insurance Plans
Life insurance is not just about living for the future, it’s also about protecting your legacy. It can help protect what matters most to you and your family, like helping pay for college or funeral costs. It can also give you peace of mind knowing that one less financial burden will be weighing on your loved ones in the event of an unexpected tragedy. The two main categories of life insurance policies are term policy and unit-linked insurance plan.
What is a Unit Linked Insurance Plan?
A ULIP or Unit Linked Insurance Plan is a mix of both investment and insurance. One section of a ULIP premium is used to pay the insurance portion of the policy. The other segment is invested in a portfolio of investments divided into a variety of funds like equity, debt, and balanced. ULIPs can have a variety of funds, giving you a lot of flexibility.
Moreover, most ULIPs allow you to switch between funds, although they might charge fees if you do so. There are some costs you should expect from ULIPs that can be broken down into mortality charges, fund management charges, and administration charges. However, the number of free switches depends on the insurance provider.
What is a Term Insurance Plan?
If you’re looking for a straightforward way to protect your family from the possibility of an untimely death, term insurance is a cost-effective way to do it. The plan is typically intended to protect your family members’ and dependents’ future in the event of your unfortunate death. Payouts are generally made to the holder’s beneficiaries, who can then use this money to replace lost funds.
A term plan is an affordable option if you don’t require long-term protection, and the premiums are lower than those for other types of plans. There are various term plan options available, and it’s important to choose the one that best matches your financial requirements and provides an adequate cover to sustain your family’s lifestyle in your absence.
Difference Between ULIP And Term Insurance
Let us take a look at the major difference between ULIP and term insurance. Term insurance guarantees your family’s financial security in case you’re not around anymore. Instead of spending a lot of money on a life insurance plan, term insurance provides you with the same level of protection at a much lower monthly premium.
Even if the plan doesn’t require you to make any investment, you can still get additional benefits by opting for additional covers. The insured gets adequate coverage and the premiums can be paid through various modes.
For example, there are certain riders that you can choose to add to your policy: waiver of premium, critical illness rider, accidental death advantage, return of premium, and so on. the duration of the policy can be anywhere in the range of 5 and 40 years.
Moreover, as the premium remains the same throughout the tenure of a term plan, it makes sense to choose a plan that you can manage for the long term.
While you’re deciding which insurance to choose, the major thing you need to consider is your financial plan. If you have a long-term financial goal that requires a scheduled approach, then term insurance is the logical option to take because it is designed for people who do not require regular access to their savings.
If you’re looking to invest in life insurance products alongside your investment, unit linked insurance plans are the best option. Before deciding between the two, it’s important to weigh up your needs and choose a plan that will help you meet your goals
3 Best Term Insurance Plans
1. Canara HSBC Oriental Bank Of Commerce – iSelect Star Term Plan
iSelect Star Term Plan has many options which make the coverage more extensive. There are several options available, including Return of Premium (ROP), which allows you to get back all of your premiums if you outlive the policy term. This form of term insurance will only pay out if either you or your spouse dies.
2. Exide Life Smart Term Plan
The Exide Life Smart plan is a non-participating, non-linked individual protection plan. It provides higher protection at nominal rates without sharing the benefits of your investments. This policy has a death benefit and will return your premium to you if you live throughout the policy tenure. You can pay premiums for this term plan in your choice of monthly instalments, semi-annual instalments, or in one lump sum.
3. ICICI Pru iProtect Smart Term Plan
The iProtect is a comprehensive term-life insurance product that provides coverage for your family in the face of unpredictable events, with additional protection through riders like accidental death benefits and critical illness benefits to enhance your coverage. This is a very popular term plan that can be purchased online. It offers comprehensive coverage against terminal illness, death, and disability. You can even choose from multiple premium payment options including lump-sum, monthly income, and increasing income.
3 Best ULIP Plans
1. Canara HSBC Oriental Bank Of Commerce – Invest 4G Plan
This is the perfect product for people who want to secure their families. It offers insurance benefits in addition to a savings plan. There are several benefits associated with this plan such as wealth booster, loyalty add-ons, mortality returns on maturity, and a lot more. It’s certainly a perfect plan to protect your loved ones from the uncertainties of life.
2. HDFC Life Progrowth Plus Plan
HDFC Life Progrowth Plus is a unit-linked insurance and regular premium plan. It offers flexibility in choosing your investment funds and premium payment terms. This plan offers both saving and protection benefits.
3. SBI Smart Wealth Assure
The SBI Smart Wealth Assure is another ULIP plan that requires only a single premium to be paid only once. Moreover, it also provides flexibility to invest in guaranteed return funds for ten years.
Bottom Line
Term insurance is the cheapest life insurance policy, but it does not provide any returns or savings on maturity. ULIPS are more suitable for your long-term savings purpose where you get regular returns on policies. Therefore, choose the one that fits the bill for you.
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