What is the essential difference between a traditional plan and an Ulip?

Rajesh Sud, CEO and Managing Dierctor, Max Life Insuranceexplains the difference between these two product platforms with an example that touches our life every day. It is like making a choice between a point-and-shoot camera and a high-end SLR camera, when you are planning to capture the best moments of your next holiday. So, are you interested in creating photographs that are customised to your taste or all you want is consistent, good photographs without getting into managing multiple features of a camera? The key differences between a traditional plan and an Ulip can be considered similarly while finalising your financial plan for long-term savings and protection.

The most critical difference is the ownership of investment risk and potential returns on investment. Traditional insurance plans such as term plans, endowment plans and whole life policies are like point-and-click cameras. They are considered free from volatility and come with the assurance of fixed returns at maturity or at the death of the policyholder and the investment risk is borne by the life insurer. Ulips have the potential to provide higher returns just like a DSLR camera has the potential to give you superior quality photographs. Since they are market-linked products and provide the flexibility to choose the asset class, the risk factor is higher in Ulips. They offer the flexibility to customise the asset mix according to your needs and risk appetite, unlike traditional plans.

olmdesk@outlookindia.com