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Unit Linked Insurance Policies (ULIPs) offer insurance plus investment objectives to those who want a higher amount of insurance cover at a marginally higher cost. However, unlike mutual funds, which may be a short- term investment play, ULIPs meet long-term investment objectives. Essentially, ULIPs must be treated as long-term (15-plus years) investment
vehicles.
Returns are varied across the risk class. One can categorise risks into three classes for both MF and ULIP schemes—high, medium, and low risks. High- risk policies have a higher exposure to equities and low-risk policies might have low or no exposure to equities. For MFs, high-risk comparable products are diversified equity funds, medium-risks are balanced funds, and low risks are debt instruments.