Unit Linked Insurance Plan (ULIP)

What Is Unit Linked Insurance Plan (ULIP)?

How Does ULIP Work?


The working of a Unit Linked Insurance Plan is very interesting. Once an investor pays the premium, the policy provider distributes the amount in two parts -

1. Life cover

2. Investment in debt and equity. 

Fund options are selected by the investor based on wealth creation objectives and risk appetite.

ULIP works much like mutual funds, where the insurance company provides Units based on the proportion of the investor's premium invested in the market. Here Units present investments as declared as Net Asset Value.

If you partially withdraw from the corpus, then the specific unit is sold.

Here is an example to demonstrate how ULIP works -

For instance, Shekhar invested in a ULIP for 20 years. His age is 30 years, and he opted to pay a yearly premium of ₹50,000.

Here are the policy details –

Initial Sum Insured

₹50,000 x 10 (years to pay premium) = ₹5,00,000

Yearly Administration And Other Charges


Annual Investment


Initial Net Asset Value


Purchased Units

47500/10 = 4750

ULIP plan return in respective cases is -

  • Death Benefit - If Shekhar dies between the policy period, his nominee will get the sum assured, i.e., ₹5,00,000 or fund value, whichever is higher.
  • Maturity Benefit – After 20 years, if Shekhar remains alive, he will get maturity benefit as total fund value.

What Are the Major Types of ULIP?

How to Invest in ULIP?

Factors to Consider While Investing in ULIP

What Are the Benefits of ULIP?

What Are the Returns from ULIP?

Frequently Asked Questions