How ULIPs can be Profitable?

ULIPs means Unit Linked Insurance Plans. So many readers have asked me the same question again and again that “How ULIPs can be profitable?”.

Well, Remember 2 Golden Rules for ULIPs.

Rule No.1 Insurance + Investment = Bad Combination.

Rule No. 2 ULIPS can be profitable only if you are on Selling Side.

Do you understand the above 2 Golden Rules of ULIPs? Well let me describe the above rules in Detail.

First rule says that, Never Mix your Insurance needs and Investment needs. Means buy a separate pure Life Insurance for your Insurance needs while buy Mutual Funds only for your Investment needs. The reason is simple. Because ULIPs are nothing but the Opaque Mutual Funds. They charge anywhere between 10-20% of Entry Loads. While Mutual Funds charge only 0-2.5%.

According to Second Rule, ULIPs are profitable only when you are on Selling side. Means ULIPs are most profitable Products only when you are an Agent i.e. selling ULIPs for higher commission. Otherwise ULIPs are never profitable because the administrative charges associated with ULIPs are higher.

So in my opinion, You should buy a separate term Life Insurance policy and a separate mutual fund. But you should not mix Investment with Insurance (ULIPs). I know that your Insurance agent or a Broker won’t tell you this because they want high commission. This is something you have to decide your self.