Unit Linked Insurance Plan: Meaning & Benefits Explained

What are ULIPs?

Types of ULIPs

How does Unit Linked Insurance Plan Work?

Benefits of ULIP Plan

Investing in ULIPs offers a range of advantages that cater to diverse financial goals:

Dual Benefits

ULIPs merge insurance coverage and investment growth, thus securing your future while growing your wealth simultaneously.

Flexibility

Enjoy the freedom to switch between funds based on market trends, your investment goals or risk appetite, thus aligning your financial aspirations with the investment. You can also make partial withdrawals or make additional investment through top ups based on your personal financial situations.

Transparency

ULIPs provide clear insight into fund performance, charges, and investment strategy, enabling informed decisions. The charges of ULIP are regulated by the Insurance Regulatory and Development Authority of India (India) and must be disclosed upfront.

Tax Benefits

Enjoy deductions under Section 80C for premiums paid and tax-free maturity proceeds under Section 10(10D) as per the prevailing tax laws and limits.

Wealth Accumulation

ULIPs facilitate goal-based planning, allowing you to tailor investments to specific milestones, like education, home purchase, or retirement. They are majorly long-term investment products thus utilising on the power of compounding and help to build a significant corpus over time. 

Who Should Invest in ULIP?

Understanding ULIP Funds

ULIP vs Mutual Funds - Which Investment is Better?

The answer to the above question depends completely on Investment Objective and Risk Appetite. While insurance is necessary for financially protecting your dependents, investment is important for multiplying wealth for your financial goals.

Let’s see a more detailed comparison of these two investment tools:

Aspect ULIPs Mutual Fund
Investment Goal Financial Coverage + Investment Investment with varying risk levels as per the risk appetite
Death Coverage Death Coverage available No Death Coverage
Total Charges Cannot exceed 2.25% by IRDAI regulation Cannot exceed 2.5% by SEBI regulation.
Lock In Period Minimum Lock In Period of 5 years for tax benefits No Lock In Period.

Thus, choosing between Mutual Funds and ULIPs depends on how it fits into your investment goal. 

ULIP Calculator

ULIP Charges

What is ULIP Net Asset Value (NAV)?

How to Choose the Right ULIP Plan?

FAQs about Unit Linked Insurance Plan

What is the Ideal Time to Invest in ULIPs? up-arrow

Investing in ULIPs yields better returns over longer investment periods. Starting investments early proves advantageous, granting ample time for your investment to mature in alignment with your financial objectives.

Can I Partially Withdraw From My ULIP During Emergencies? up-arrow

Yes, most ULIPs provide partial withdrawal options after a specific lock-in period.

Is There a Maturity Benefit in ULIPs? up-arrow

Yes, ULIPs provide a maturity benefit that includes the fund value at the end of the policy term.

Are ULIPs suitable for retirement planning? up-arrow

The longer tenure in hand for growing the fund value and the availability of life cover all through the tenure makes ULIPs a good option for retirement planning.

How Can I Maximise My ULIP Returns? up-arrow

Here are some simple steps that you can follow to maximise your returns:

  • Start early.
  • Pay premiums on time.
  • Take advantage of the strategies offered and invest in various funds.
  • Review your investment portfolio regularly and make changes.
  • Add top ups to strengthen the investment.

What Are the Major Things to Keep in Mind While Investing in ULIP? up-arrow

Some of the major factors that one should keep in mind while investing in ULIPs are:

  • Charges
  • Premature Surrender conditions
  • Fund options
  • Features and Benefits
  • Limitations and Exclusions
  • Lapse and Grace Period conditions
  • Other Disclosures

Is it true that ULIPs come with high charges? up-arrow

No, as per IRDAI ULIP charges cannot exceed 2.25% of the fund value. In fact, the new age ULIPs come with zero premium allocation and admin charges.

Does Market Volatility Affect Life Cover? up-arrow

No, market volatility only affects fund value. Life cover is usually 10X the premium paid. In most ULIPs, if the insured passes away during the tenure, the higher of the fund value or life cover is paid as the sum assured.