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What are unit-linked insurance plans? Are they risky investments?

A unit-linked insurance plan provides both insurance and investment benefits
By OLM Desk | October 20, 2017

I have been recommended to go for a unit-linked insurance plan. What are these policies? Are they risky investments? 

Devika Shetty, Mangalore

A unit-linked insurance plan provides both insurance and investment benefits. In unit-linked plans, the premiums paid are invested in funds offered by the company, and the policyholder determines the appropriate ratio of investments into these funds. The funds are generally invested in equities, debt instruments, money market instruments, and government securities. The value of the policy
is determined on any day by multiplying the number of units issued by the value of units on that day. The value of these units is called the Net Asset Value (or NAV) and is based on the market value of the under- lying investments. Unit-linked insurance products are risky, because the premium money invested on behalf of the policyholder is subject to market risk. The funds do not offer a guaranteed or assured return. Insurance companies will only show you a projected return that may or may not be achieved.

 

olmdesk@outlookindia.com

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