Compared to conventional insurance products, ULIP, which is a new generation product and which was not accepted widely even though it has been known to have some unique features and advantages over many other insurance products has a host of benefits that are comparably more than any other traditional policies of a life insurance company. The main advantage of using this vehicle of investment over any other product that is available in the market is that it gives the policyholder the opportunity to invest in a wide variety of investment products that are eligible to be invested in. Similar to all other investment products, ULIP too has its own share of features that make it a desirable vehicle for investment. Another advantage of the product is that it is possible to be tailored to the specific needs of the individual investors.
Multiple Objectives: When a person opts for an ULIP investment, the monies invested by investors are distributed across equity, balanced and debt funds after first allocating a major chunk towards insuring their life. Hence, it can be seen that you get the best of both worlds, viz., insurance as well as creating wealth in the long term. While this seemingly dual advantage was always an inbuilt feature, insurance and investment advisers did not recommend this product as much as other popular products in the market.
Flexibility: ULIPs allow the investor to switch their funds depending on the performance of their chosen vehicles of investment which would in turn lead them to better returns in the long run. The investor can choose between different available options. However, that would primarily depend on the risk appetite of the investor as well as the performance of the market during that time.
Higher Returns: In what can be described as a thunderbolt out of a clear blue sky, the investing public had to open their hearts and some also opened their purse strings to this instrument of growing wealth. This became possible only when they realized that the previously circulating news that ULIP investment is not such an attractive option for growing or creating wealth since there are so many inbuilt problems within the plan itself, is but a myth. This myth may have been circulated by people who were supposed to be responsible to make the product popular, namely, the advisers.
One of the reasons these policies didn’t make it into the minds of the public may have been the stance taken by the investment advisers. After all, a majority of the investors and insured rely on these agents to offer them advice on which of the instruments from among those available can bring them more profits.
It is rightly said that you get the answers that are relevant to the questions that you ask. Hence, in a way the advisers may also be above board when it comes to questioning their motives about the particular product. In hindsight now, it seems that the populous of India should have been asking the right question which should have been ‘Which are the best investment options in India that are available at this moment?’ rather than the questions that the bulk of them asked which was ‘How much will you gain from this in a bid to corner some discount on the initial investment’, also known as the first premium to be paid. And then, if the advisers had still lured the public away from this lucrative deal even albeit maybe lesser commission, we could have learnt of the underlying problem behind the crisis.
Economic: Whether a particular policy is popular among the advisers is determined by the economic factor. In other words, investors that are knowledgeable delve deeper into the fine print of the policy and only then make a decision to whether take to the plan or delineate themselves from the product. However, there are some who blindly trust their agent or adviser and may have to pay a steep price for such an action.
Another one of the factors that decide it is the entry and exit load that is levied on the investor and secondly, what is the monetary gain for all concerned to push the particular product to the public, especially the ones that want what the particular product offers.
Long Term Planning: Wealth creation is always a long term endeavour. However, there was a time when some people did hit their jackpots in the trading business as well as downright speculation. However, those plays did not (and will not) last forever. On the other hand, success that is the fruit of long and patient time spent nurturing remains a good source of the best kind of fruit for a very long period of time. That is exactly the underlying principle of ULIP investment. Hence, with the right kind of information and the innermost desire to help their clients get to the goal of long term wealth creation, it can prove to be a win-win situation for both the investor as well as the adviser.
Conclusively, in view of the above argument, we have to note that any product that is launched newly should always be sold properly, which ensures not just the continuous premium payment but also a steady flow of income for the adviser. This then translates to a win-win situation.