Unit linked Insurance plan is one that provides life insurance where the policy value varies according to the change in the value of the assets at that point in time. This value is also called net asset value or NAV. NAV is calculated by deducting the liabilities from the assets and is also used in open ended mutual funds.

• Such type of insurance plans came into existence in the 1960’s and became popular in many countries due to the flexibility that they offer. These plans can be made so that they not only provide life insurance but also provide other financial products. Typically most unit linked insurance providers also offer financial planning for childrens marriage and other types of products.
• These policies also offer retirement planning solutions along with life insurance making them ideal for a long term investment. In fact mutual funds are used as investment vehicles rather than for purely providing cover in case of death. This is the second reason for the popularity of unit linked financial products.
• In a unit linked insurance plan a person can enjoy the benefits of an investment such as mutual funds along with life cover. A part of the payment made as premiums goes to the sum assured (sum payable as death benefit/ maturity value) and a portion goes towards the investments. The investment can be chosen by the insured person – equity, fixed- plans or a mixture of both.
• Unit linked life insurance plans are a little different from unit linked funds that are famous in the U.K. These are a collective type of investment offered through life assurance policies. As the popularity of unit linked products has increased companies are providing externally managed funds as opposed to the traditional life insurance funds that are internally managed. This is because externally managed funds have better returns compared to internally managed ones; however the premiums for such funds are higher.
• These funds are open-ended investments made accessible through life assurance companies. There is no self-governing organization tasked with protection of the property. The company might administer, endorse and hold the assets on behalf of the policyholders. The policyholders have rights to the assets but do not have possession of the units, nor are the units immediately redeemable.

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