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What Are Unit Linked Endowments For Low Cost Life Insurance?

By Lisa Olsen Posted in Life Insurance News

There are several different approaches to the methods by which health insurance premiums are used by health insurance companies. One of these methods is the concept of unit linked endowments, often referred to as ULIPs. In this type of health insurance, part of the insurance premium goes toward traditional coverage, while the rest goes into the purchase of fund units that are invested in various areas. Some funds are primarily invested in the stock market, others are invested in mutual funds or other investment vehicles.

The fund is administered by a fund manager, whose job is to move the investments to produce the highest yield for policy participants. As in most other types of mutualized investment, the fund manager is allowed to retain a portion of proceeds, typically from .5 to .75 percent.

Benefits/Risks

One of the primary benefits of ULIPs is that it allows participants to have some level of life insurance coverage, while at the same time using part of the premium to be invested in other vehicles. As always with any investment plan, there is a level of risk which must be evaluated by each individual participant. The security of possessing life insurance must be weighed against the possibility that the net asset value (NAV) may actually decrease and the resultant money paid into the plan may be reduced in value. However, in most instances, since the term of the plan is over longer periods, decreases in NAV are temporary and most participants enjoy a good return on their investment. Another benefit is that the proceeds from redemption are tax free and not subject to capital gains taxes.

As always, it is up to the individual to decide which is the best path for his or her particular circumstance. Using ULIPs to facilitate an investment strategy is just one way to maximize returns on something everyone purchases.

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3. What Is Endowment Life Insurance?
4. What Are The Different Kinds Of Life Insurance Plans?
5. Shopper’s Checklist For Buying Life Insurance At A Low Cost Discount