A safe & sound financial plan is a prerequisite to a happy and prosperous life, which is why we invest our minds, money, and soul into it. However, the question arises as to which we should choose: ULIP or Term Insurance? Both insurance products offer their pros and cons. Although each insurance plan has benefits and drawbacks, they all have the same objective. We purchase insurance to provide financial security for our loved ones and ourselves. The market offers a variety of insurance policies, depending on the policyholder's financial objectives. Let us understand both the insurances first.
What is a ULIP Plan
A unit-linked insurance plan is a type of insurance that has the components of insurance and investment. Even if you don't have a steady source of income, these ULIP plans can still help you see the benefits of your savings and reduce your tax burden.
Features of ULIPs
- The premium you pay for this policy is split into two parts, with one portion going toward insurance coverage and the other being invested in your chosen funds. These funds then make investments in the stock market.
- A ULIP policy is an investment cum insurance policy. So you can have growth in a single insurance plan.
- To get reasonable market returns, it is wise to invest in long-term ULIPs.
How ULIPs Work?
In a unit-linked insurance plan, you are the master. Here, you have the flexibility to decide the amount of premium you wish to pay. The life insurance company will decide the minimum ULIP premium amount. Your premium is then invested in the investment fund of your choice. There are three different kinds of investment funds available.
What is Term Insurance?
A contract between the policyholder and an insurance provider is term insurance. If a policyholder passes away tragically, the insurance company will pay a certain sum to the insured person's family.
Term insurance is a type of life insurance that, in exchange for a premium, aims to provide financial support for your family in the event of your passing. All you have to do to obtain a life insurance policy is pay an affordable premium.
Features of Term Insurance
- A term life insurance plan offers very high and extensive coverage. You can purchase covers that cost several crores.
- When using the online term plan comparison process, another intriguing feature is the ability to select from a variety of flexible policy tenure options.
- Several types of term insurance include increasing cover, decreasing cover, level cover, and TROP.
How Term Insurance Works
You have the freedom to select the tenure when purchasing the policy based on your age while buying and your specific insurance requirements. A term plan is a pure protection plan, unlike other life insurance policies that provide survival benefits or opportunities for investment and savings. Its main objective is to provide your family with the financial security they require while you are away. Your policy contract will be terminated if you fail to pay the premiums. Term insurance is suitable for people who need to safeguard their family interests.
The Verdict
Term insurance is a great insurance product that will ensure the safety of your loved ones, whereas ULIPs are a great way to have a return on investment and achieve your dreams, whatever they may be. Both policies fulfil different purposes. As a result, you shouldn't pick one over the other. Both of these should be included in your investment portfolio because they will not only help you safeguard your family's financial future but also enable you to build up a corpus for your retirement and other requirements in the future.