When managing your money, two main goals often come up: protecting your family and growing your savings. A Unit Linked Insurance Plan (ULIP) helps you do both. It offers life insurance and also invests your money in the market. This makes ULIPs a smart choice for long-term goals. For example, you can use them to save for retirement, your child’s education, or to build wealth. Overall, ULIPs give you a balanced way to grow and protect your money.
Let’s break it down point-wise
What is a ULIP?
A ULIP is a life insurance plan in which a portion of the premium you pay is first used to provide life cover. Meanwhile, the rest of the amount is strategically invested in equity, debt, or balanced mutual fund options, aligned with your risk profile.
- You can:
- Choose the type of funds to invest in (equity/debt/hybrid)
- Switch between funds based on market conditions
- Track the fund performance just like mutual funds
For a detailed understanding of the regulatory framework, you can refer to the official IRDAI guidelines on ULIPs
Key Features of ULIPs
- Dual Benefit
- ULIPs offer the protection of insurance and the returns of market-linked investments in one single plan.
- Flexibility
- You can switch funds (debt to equity and vice versa)
- Choose a premium payment term and sum assured
- Opt for top-ups (extra investments)
- Lock-in Period
- There is a 5-year lock-in period, making them suitable for long-term goals.
- Tax Benefits
- Under Section 80C, premiums up to ₹1.5 lakh are tax-deductible
- Maturity proceeds are tax-free under Section 10(10D) (subject to conditions)
ULIP vs Other Investment Options
| Feature | ULIP | Mutual Funds | Term Insurance |
| Insurance Cover | Yes | ❌ No | ✔️ Yes |
| Market-Linked Returns | Yes | ✔️ Yes | ❌ No |
| Tax Benefits | ‘0.80C & 10(10D) | ✔️ 80C (ELSS only) | ✔️ 80C |
| Lock-in Period | 5 years | 3 years (ELSS) | No lock-in |
| Fund Switching | ✔️ Yes (free/limited) | ❌ No | ❌ No |
Recent Trends and Survey Insights
According to the IRDAI Annual Report 2023-24:
- ULIPs accounted for ~15% of new premium collection in private life insurers.
- Given the dual benefit and flexibility they provide, it’s no surprise that young urban investors are increasingly favouring ULIPs.
- The digital purchase of ULIPs increased by 28% YoY, reflecting growing investor comfort.
Source: IRDAI Annual Report 2023-24
A Kantar-ICICI Prudential Survey (2023) also showed that:
- 47% of urban salaried professionals consider ULIPs a secure long-term investment
- Interestingly, 31% of investors value the fund switching option during volatile markets, as it enables them to adjust their investments according to market conditions.
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Charges in ULIPs (Important to Know)
ULIPs used to have high charges. But now, most plans are more affordable. Some common charges to know about are:
- Premium Allocation Charge (1-2%)
- Fund Management Charge (up to 1.35% p.a.)
- Policy Administration Charge
- Mortality Charge (for life cover)
- Switching Charges (after free limit)
Who Should Consider ULIPs?
ULIPs are ideal for:
- Individuals with medium-to-long-term goals (5+ years)
- Those who want a single product combining investment + insurance
- Investors seeking tax benefits and disciplined savings
They may not be suitable for:
- Those looking for short-term returns
- Individuals who want pure protection (term insurance is better for that)
Conclusion: Are ULIPs Worth It?
ULIPs have changed a lot over the years. Today, they are more transparent, digital, flexible, and easier for investors to use. If you want both insurance cover and market returns, a ULIP might be a good choice. But before you invest, make sure you know your goals, how much risk you can take, and how long you want to invest.
