The unique combination of investment in mutual funds, debt market, and life insurance coverage has always attracted investors to different unit-linked insurance plans (ULIPs). These plans also help in investing for long-term goals like buying a house, retirement, or children's higher education. Additionally, the waiver of premium (WOP) feature enables ULIPs to fulfil long-term investment goals even in case of unfortunate incidents like the untimely demise of the policyholder.
The ULIP provides the dual benefit of investment and life insurance. The premium paid to a ULIP is divided into two parts. The first part goes into life cover, whereas the other one is invested in the fund of the investor’s choice, be it equity, debt, or a combination of both. Opting for a waiver of premium rider with ULIP helps in the protection of long-term investment goals even at the time of the untimely demise of the person.
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A WOP plan ensures that a policy like ULIP doesn’t lapse in case of the policyholder’s demise. It also protects the dual benefit of ULIP, i.e. insurance and investment.
“In case of the untimely demise of the policyholder, the company will pay out life cover or fund value, whichever is higher. However, the investment part will not be continued because of the lapse of premiums that will be invested," explained Vivek Jain, Head of Investments, Policybazaar.com.
On the other hand, a WOP feature in ULIP ensures the continuity in investment along with the payout of the life cover at the time of demise, he added.
There is a common perception that disapproves of mixing investment goals and life insurance coverage, making ULIPS an unfavourable
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