Most individuals are often confused when it comes to buying insurance due to the number of products available in the market. These include term insurance, ULIPS, endowment policies etc.

Insurance can also be distinguished between Unit Linked Insurance Plans (ULIP) and traditional or conventional plans. Before buying one has to be clear on the choice of the product. This can be clear based on your objectives.

ULIPs are popular because they are combination of insurance and investment in a single product. ULIPS are market-linked, and are likely to deliver higher returns based on the market conditions.

Term plan, endowment and whole life insurance policies come under traditional plans. These are considered risk-free, as they provide fixed returns in case of death or at the maturity of the term.

Here is a comparison between ULIP and Traditional Plans

ULIPs Vs Traditional Insurance Plans: Which to buy?

We strongly recommend that investors go for a traditional insurance plans. These offer higher insurance amounts than ULIPs. The latter has many expenses involved and hence does not give enough value. It is a mix of investment and insurance, which does not always offer the best.

Conclusion

ULIP returns are based on the type of funds you choose, returns might be lower if you invest in the money market scheme because of the various charges. Also, it does provide decent insurance coverage. ULIPs provide you an insurance coverage of around 10 times the annual premium paid.

Traditional plans offer you coverage based on the product. Term insurance offers you heavy insurance coverage that can meet all your requirements, in case of death. However, you do not get the amount invested back. Endowment plans offer less insurance, but give an investment option as well.

Interestingly, both the above offer you tax savings under Sec 80C of the Income Tax Act.

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