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Unit Linked insurance plans and their benefits

BY: David Prakash Kumar | Category: Business and Finance | Post Date: 2009-12-28
 



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   David Prakash Kumar
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An unit linked insurance plan as the name indicates is an insurance plan that is linked to an unit. Here the unit refers to the unit of equity. There are many insurance companies who are diversifying their pure insurance products into unit linked insurance plans. There are many reasons for this happening. There are also various benefits that are associated with unit linked insurance plans and this is the reason for the insurance companies giving more importance to the unit linked insurance plans.
The various benefits of unit linked insurance plans are:


1. High returns:


The return that is got by the individual is more than the return that the person would have got if the plan was only a insurance plan. This is because the insurance has been linked to the equity market and the manager of the plan tries to invest part of the amount paid by the investor in the equity market. The rest of the money paid by the investor is used as premium for the insurance. This gives more returns if there is a rise in the equity market. This is the main benefits of the unit linked insurance plan.

2. Dual benefit:

There is a dual benefit for the person investing in the unit linked insurance plan. The units are worth more to the investor because of the high returns that are got from the money being invested in the stock market. At the same time, the person also gets the benefit of the insurance scheme and there is a insurance benefit too for the investor. This dual benefit of the unit linked insurance plans have made more people try to invest money in the unit linked insurance plan, especially if they have a high risk appetite.

3. Different options to choose:

The investor has different options to choose from. The investor can choose a plan that has a high return and high risk or a low return and a low risk. The investor also has the option of changing the risk profile of the plan at least three times in a year. These options that the investor has got is another reason for the rush to the unit linked insurance plans.

4. Liquidity:

Many of the unit linked insurance plans also offer a high amount of liquidity to the investor. The investor can redeem the units as and when he pleases. This option that provides the liquidity option to the investor has made more people rush to these schemes. Though the high liquidity is not an option in many unit linked insurance plans, there are some plans that have this option which can be of great benefit to investors who may suddenly be in need of money.

These are some of the most important benefits of the unit linked insurance plans. The benefits linked to this plan has made more people try to buy an insurance that is unit linked than a plain vanilla insurance plan or other types of insurance plans. It should be remembered that the investor should invest on the plan depending on the financial needs and not only because of the sake of investing.

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