insurance: a basic need.

This article is for two types of people: one who always thinks that he/she has saved a lot for his/her future and also for his/her family and will be able to sustain his life as God has given enough, overlooking the potential risks. The other type of people wants to get insured but has a great fear & dilemma in his/her mind thinking what type of policy to take?how much to invest ? or from whom to take. Now a days most of the Insurance companies operate through Agency model and sometimes people also look down upon this channel as they feel that the agents are mere representatives of the company and cannot manage their portfolio. Don't worry,this article will make you aware of basic Dos and Don't s before purchasing a policy and also about basic functionality of various types of Insurance Policy.

Today I will try to cover all about ULIPs or Unit Linked Insurance Plans as an overview.Don't get scared after hearing the word "UNIT LINKED" or thinking of the present Bearish market situation, you can infact still gain a lot. Making money is just a matter of paitence and time. Now lets start our topic:

ULIP: how they work?

Unit Linked Insurance Policies (ULIPs) as an investment option are very much similar to mutual funds in terms of their structure and functioning. As is the case with mutual funds, investors in ULIPs are allotted units by the insurance company and a net asset value (NAV) is declared.

Similarly ULIP investors have the freedom of investing in their chosen portfolio or funds like the equity funds, balanced funds and debt funds to name a few. Generally speaking, ULIPs can be termed as mutual fund schemes with an insurance component. But why to go for an ULIP..the answer is: wealth maximization can be realized only in the long run and though various companies promise to double your money in one year or so, actually cannot as nothing is in their hands. So it is advisable to go for ULIPS taking care of the present situation as only time can give you actual realization. Besides in ULIPs not all of your money is invested in the equity market.A portion is also kept safe in the debt instrument or money market instrument and you have the authority and freedom to construct your portfolio. But in case of OPEN_ENDED mutual funds you do not have the option. Either you have to invest in a equity mutual fund or a debt mutual fund.Besides in money matters people always have the mentality to get short-term gains.But remember nothing can be gained in shortcut. Besides another good thing is that there is a 3 years locking period in all the insurance policies thus it will act more or less like a fixed deposit for the traditional investors. Thus the option is up to you: you want to play safe? or take a chance? But most of the people don't go for ULIPS due this locking period but I would rather suggest that go for it if you want to gain out of this situation. Besides most ULIPSs are attached with good insurance schemes which will really benefit you and your family. I have seen people suffering due to certain sudden mishap.Anything can happen anytime but the problem is people always ignore those threats or danger. Besides do your Financial Health Checkup to know where you stand? How much you need to invest and covered on the basis of your income , present inflation rate and predictable future inflation rate.(I will publish the Financial Checkup Format in my later posts).

Basic Dos and Dont's before investing in an ULIP

1. Always opt for Child plans or retirement plans due to their smart combination of investment and insurance.
2. Go for a practical term period. If you are 25 then go for 10-15 years term in a single policy .
3. Don't think that you are over insured, no one is over insured, rather always take 2-3 policies with 10-15 years term. As this will give you maximum returns in time of maturity.Besides in time of emergency you can surrender one policy and still you will not have to worry as you have two more policies with you. If you have only one policy with a huge premium and a term of 30 years then think of the situation if something happens you are left with nothing.
4. Always enquire about the sectors where your money is invested, portfolio manager, his experience , surrender charges & allocation charges. Always go for policies where allocation charges are low.
5. Do not believe in fake promises like"doubling you money in 3 years" & etc etc.
6. If any agent contact you,tell him/her to take his/her Sales Manger with him and always give appointment to 2-3 agents of different company to make a comparative study.
7. Always do the financial checkup before deciding on the Premium amount: As a sales manger or agent may convince you to give high premium ..due to his earning benefit.but always calculate that according to your income and expenditure how much you can pay.
8. Besides always try to opt for Half-yearly or yearly premium mode.
9. Fill up the form by your own specially the sections where amount,terms,and name of plan to be given
10. After receiving your policy kit don't keep it in your cupboard rather use the ids and passwords given inside it to regularly track your wealth performance on a monthly basis.