A Detailed Guide to ULIPs in India

ULIP (Unit Linked Insurance Plan) gives a policyholder the dual benefit of insurance and investment in a single plan. In a ULIP plan, a part of the money you invest is allotted to safeguarding your life, while the remaining amount is used as an investment in the market. Policyholders of ULIP can pay their premiums monthly, quarterly, half-yearly or annually.

In a ULIP policy, the investments are bound to be influenced by the capital market risks, to some extent. The policyholder bears these investment risks, and hence, the investment choice should be made after considering one’s risk appetite and financial needs. 

Advantages of ULIP 

  • Freedom to choose life cover:
    With a ULIP, you have the freedom to choose the amount of life cover that you want. In most of the ULIP plans, the minimum life cover that you get is ten times more than the premium amount you pay. However, depending upon the policy and the insurance company that you choose, you can select your life cover amount as much as 40 times of your annual premium amount or higher. 
  • Freedom to choose investment type:
    ULIP allows you to invest in the different types of investment based on your risk appetite and investment goals. For example, if you seek to grow your wealth and don’t mind taking a risk, you can invest in equity funds. Likewise, if you are not ready for high-risk investments and want a steady return on investment, you can choose debt funds. 
  • Liquidity:
    ULIP offers an option called partial withdrawal which enables you to withdraw a part of your money. This option is free of cost and can let you take care of any immediate expenses. 
  • Goal-based planning:
    Unit Linked Insurance Plans are structured in a way that they allow you to create goal-based planning for your wealth such as wealth creation, retirement planning or saving for children’s education or their marriage. 
  • Tax Benefits:
    With the help of a ULIP plan, you can also save taxes on your hard-earned money. Under Section 80C of the Income Tax Act, you can save taxes on the premiums which you pay for your ULIP plan. 

List of ULIP Charges 

You can know the charges which might be deducted as administration and benefits costs from the policy as per your insurer’s guidelines:

  • Administration Charges:
    These are monthly charges, levied for the administration of the policy. 
  • Switch Charges:
    A certain number of fund switches are free of cost, and anything beyond that calls for switch charges. 
  • Surrender Charges:
    A percentage of the premium and the fund value make up these charges when the insurer prematurely surrenders the ULIP.
  • Fund Management Charges:
    These charges are used for fund management and are deducted prior to assessing the fund’s net asset value. 
  • Mortality charges:
    These charges depend upon the policyholder’s age and the coverage amount and are levied to offer death cover to the policyholder.

What is the structure of a ULIP? 

In a Unit Linked Insurance Plan, the premiums paid are used as investments in the funds selected by the policyholder after deduction of allocation charges. Through the cancellation of certain units, the costs for policy administration, fund management and insurance cover are subtracted from the funds which are then used for investment. 

By dividing the entire value of the fund’s investment by the total number of units, it is possible to know the price of every unit of the fund.

What type of investors should opt for ULIPs? 

  1. Investors who want to track their investment closely: Unit Linked Insurance Plans allow investors to track their investment portfolio closely. They also let you switch from one fund to another; however, be informed that the risk and return ratio will vary according to the funds.
  2. Investors with medium to long-term investment plans: ULIPs are one of the best types of investment for individuals who are ready to make long term investments. 
  3. Investors with varying risk profiles: Across the various funds offered, there is a choice of fund available for every type of investor – from those who avoid taking a risk to those who have a large risk appetite. 
  4. Investors across different life stages: ULIP plans offer a wide range of categories which you can choose from depending upon your financial needs at various stages during your lifetime. 


ULIP offers the policyholder twin benefits of being covered by life insurance and making an investment in the stock market. Make sure to conduct detailed comparisons amongst the best ULIP plans and choose one that fits your financial needs accurately. 

David Curry

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