This guidance note attempts to present a broad view on ULIP products offered by various life insurers in India, so as to enable investors to take a well-informed decision.

Each in that order-all these factors are vital and life insurance is traditionally seen as a protective cover with minimal returns. With the changing times and growing investor needs, this traditionalistic view is metamorphosing into a protective cover with optimal returns. Thus, it opens an era of Unit Linked Insurance (ULI) products, which cater exactly to this changed need of investors.

Further, insurance is a subject matter of solicitation and meaning-an individual investor must feel a need for insurance and such need, after due analysis, is accepted by an insurer based on certain criteria.

`With profits' life insurance products indicate investment gains (profits) and are distributed to policyholders in the form of `bonus' announced every year. For `with profits' products, the insurance company credits the premium to a common pool called the `life fund,' after setting aside funds for the risk premium on life insurance and management expenses.

Every year, the insurer calculates the amounts to be paid towards death and maturity claims against its earnings from premiums and investment returns. The surplus is arrived after providing for various reserves and also based on actuarial valuation of life fund. The net surplus amount in the fund is credited to policyholders' accounts in the form of `bonuses'.