The introduction of Unit Linked Insurance Plans has possibly been the single largest innovation in the field of life insurance .It has addressed and overcome many difficulties and concern s that customers had about life insurance – liquidity, flexibility, and transparency.
These benefits are possible because ULIPs are differently structured products and leave many choices to the policyholder. They are structured such that the protection (insurance) element and the savings element (investment) can be distinguish and hence managed according to one’s specific needs, offering flexibility and transparency. Thus we can say it is such a product that takes care of multiple needs. There were some factors which gave entry for ULIPs in the insurance market: - Firstly was the arrival of private of private players, and ULIPs were the most significant innovation done by them, and secondly was the decline of assured returns in endowment plans. Besides this as the stock markets were booming which now has become the primary factor. As mentioned earlier enhanced flexibility and merging of investment and insurance in a single entity that have really endeared them to individuals.
Early the market of ULIPs was taken up Birla Sun; they were the first to capture the market in this field. These are the insurance plans which are attached to Units – Mutual Funds. The premium amount received in this policy, some part is used in investment of funds and remaining is used for insurance cover. ULIPs are remarkably similar to, mutual fund in terms of structure and functioning: premium payments are converted into units and net asset value (NAV) is declared regularly. Investors have an option of choosing their fund according to their risk taking ability. They disclose all the material facts most frequent and consistent (often quarterly or half-yearly) .Also investor has a fairly good idea about expenses.
A comparative analysis of ULIPs (Unit Linked Insurance Plans) in the Indian Insurance Market is the main objective of the practical. We know that now a day’s people have become aware of the investment opportunities in capital market and also they like to take risk in their life. ULIPs is such a product which offers a good combination of risk and also security, i.e. it gives investment opportunity and also protection to one’s life.
· Research design –descriptive
· Data sources- primary data and secondary data
· Research approach – face to face interview, observation, individual depth interview
· Research instrument –questionnaire, list of contacts
ULIPs are very different from the traditional policies because they are based on some fundamentals of Mutual funds as different types of funds which are created wherein the premiums which are received on the policy these are invested in these funds basically these funds are of following types:-
a) Aggressive/Growth Fund:-Such funds invest a major portion in equity markets. They are therefore considered to be high on risk parameter.
b) Debt Funds: - These types of funds invest the premium money in debt instruments like gsecs, bonds and AAA rated securities. Such funds are low risk in nature.
c) Balanced Funds: - This fund is combination of growth & debt fund. This means its portfolio consists of both equities and debt instruments. The risk for this fund is moderate.
d) Money Market/Liquid Funds:- Such a fund invests the premium money in short term liquid instruments like bank deposits and money market instruments.
These are the main funds which are used, but the companies give the combination of these funds to their customers. According to their risk taking ability they offer their fund.
The features of ULIPs are as follows:-
a) Flexibility: - Flexibility in choosing your own funds how you would like to invest your own money.
b) Transparency: - It discloses all your material facts, i.e. you know where your money is been invested.
c) Liquidity: - Here you can withdraw certain amount from your Units which have been collected.
d) Tax Benefits: - tax benefits are available under Section 80C subject to a maximum limit of Rs 100,000.
The other features of ULIPs are like, life protection which can be adjustable, many investment options, benefits like disability, critical illness, surgeries, and also financial planning etc.
ULIPs are all set to pose serious competition to mutual funds. Though ULIPs as an investment avenue are closest to mutual funds in terms of their structure and functioning like disclosing their NAV’s daily etc. ULIPs are essentially a long term commitment between the policyholder and the insurance company and mutual funds are built to cater to the relatively short –term need of the investor. The investments are made with a shorter- term duration profile when compared to ULIPs. The seemingly similar structure of both of them makes it vital for investors to be aware of the fine distinctions in both the offering and make informed decisions.
Following are some insurance companies who offer ULIPs:- -Bajaj Allianz, ING Vysya, HDFC Standard, HDFC Standard, HDFC Standard, -Birla Sun life, Aviva Life Insurance, Kotak Mahindra, Max New York Life, Met Life, Sahara Life, etc Sahara Life, etc