What is a unit-linked insurance plan (ULIP)? What is the difference between a protection-cum-savings plan and ULIP?

A Unit Linked Insurance Plan (ULIP) is a product offered by insurance companies that, unlike a pure insurance policy, gives investors both insurance and investment under a single integrated plan. A Unit Link Insurance Plan is basically a combination of insurance as well as investment. A part of the premium paid is utilized to provide insurance cover to the policy holder while the remaining portion is invested in various equity and debt schemes. The money collected by the insurance provider is utilized to form a pool of fund that is used to invest in various markets instruments (debt and equity) in varying proportions just the way it is done for mutual funds. Policy holders have the option of selecting the type of funds (debt or equity) or a mix of both based on their investment need and appetite. Just the way it is for mutual funds, ULIP policy holders are also allotted units and each unit has a net asset value (NAV) that is declared on a daily basis. The NAV is the value based on which the net rate of returns on ULIPs are determined. The NAV varies from one ULIP to another based on market conditions and the fund's performance. The significant difference between a protection cum savings plan and a ULIP: Comparison ULIP Protection Cum Saving Plan Description ULIPs are instruments which provide both protection against death of insurer and savings along with investment options Protection cum Saving Plan are instruments which provide both protection against the life style after retirement, child education, Child future and savings Lock in period 5 years 15 years Transparency Most of the ULIPs allow you to track your portfolio. Individuals will get intimation on the fund on regular basis In this plan investment premium is common with the fund. Hence you cannot track individual portfolio. Maturity One can redeem units at the prevailing unit prices. Policyholder will get the sum assured plus bonuses, as per the plan.