Unit Linked Insurance Plan (ULIP) : A Complete Guide

What is ULIP?

A Unit Linked Insurance Plan (ULIP) is a life insurance product that integrates investment opportunities. Combining life insurance benefits with investment growth potential, ULIPs enable policyholders to invest a portion of their premiums in distinct funds, including debt, equity, or a blend of both. Resembling mutual funds, ULIPs allow policyholders to choose and switch between funds. They offer flexibility in premium payment, investment options, and fund switching, ensuring a customizable approach. However, they come with charges like policy administration, fund management, and premium allocation charges, impacting the overall investment returns.

Geeky Takeaways:

• A unit-linked insurance plan is a life insurance product that integrates investment opportunities.
• ULIPs combine life insurance benefits with the potential for investment growth.
• Policyholders can invest a portion of their premiums in various funds, including equity, debt, or a combination of both.
• ULIPs provide flexibility in premium payments, investment options, and fund switching, allowing for a customizable approach.

How does a ULIP Work?

1. Investment Component: In a ULIP, the investment component mirrors the structure of mutual funds. This investment aspect aims to provide policyholders with the opportunity to accumulate wealth over the long term. It offers a dynamic approach to wealth creation and potential returns.

2. Premium Allocation: When opting for a ULIP, a part of the premium serves the dual purpose of securing life coverage, while the remainder is invested in the market. This dual benefit, combining insurance and investment, enhances the appeal of ULIPs for a broad spectrum of investors.

3. Flexibility: ULIPs boast flexibility in premium payment frequency, offering options for yearly, half-yearly, or monthly payments. Moreover, policyholders can select different funds based on their risk tolerance and financial objectives. This flexibility extends to policy term choices and premium payment options.

4. Tax Benefits: Premiums paid towards ULIPs enjoy tax exemptions up to a specified limit under Section 80C of the Income Tax Act, 1961. Additionally, returns from ULIPs are tax-free under Section 10(10D), making them a tax-efficient investment avenue with attractive benefits.

5. Fund Allocation and Switching: Policyholders have the freedom to choose funds aligned with their risk tolerance. Furthermore, they can dynamically switch between funds in response to changing market conditions or evolving investment objectives. This feature empowers policyholders with flexibility and control over their investment strategy.

6. Partial Withdrawal and Top-Ups: ULIPs provide the option for partial withdrawals after a predetermined lock-in period, offering liquidity during emergencies. Additionally, policyholders can make top-up investments, allowing them to augment their investments over time to align with changing financial needs.

Lock-in-period of ULIP

The lock-in period for ULIPs typically spans five years, during which policyholders are restricted from withdrawing their investments to avoid surrender fees. This temporal commitment encourages a long-term investment perspective and aligns policyholder interests with insurance company goals. Throughout this period, policyholders are dedicated to keeping their funds invested, fostering long-term financial planning. After the lock-in period, they can withdraw without penalties, giving them the choice to exit the ULIP or continue, allowing them to benefit from lower charges over time and maximize returns.

Calculating ULIP Returns

ULIP returns are contingent on the funds chosen; high-risk funds offer greater returns, while low-risk funds provide stable but lower returns. To optimize ULIP returns, it’s essential to assess market conditions and strategically allocate funds to maximize returns. There are two primary approaches for computing ULIP returns, absolute returns and compound annual growth rate (CAGR).

1. Absolute Returns: Absolute returns represent the percentage increase in the overall ULIP value, factoring in expenses like management fees and operating charges. To calculate absolute returns, utilize the formula,

[Tex]Absolute~Returns=\frac{(Current~Value-Purchase~Time~Value}{Purchase~Time~Value)}\times100[/Tex]

For instance, if your ULIP’s value at purchase was ₹250 and it becomes ₹350 after one year, the absolute return in this scenario is 40% within the year.

2. CAGR: CAGR aids in assessing the annual growth of your investment over a specific period, providing insight into the year-on-year rate of return. The CAGR formula is expressed as follows:

[Tex]CAGR=\left[ \left( \frac{\text{Current value}}{\text{Purchase time value}} \right)^{\frac{1}{\text{number of years}}} – 1 \right] \times 100[/Tex]

As an example, if the ULIP value was ₹250 at purchase and reaches ₹350 after five years, the corresponding CAGR is 6.96%.

Features of ULIP Plans

1. Investment Allocation: One notable feature of ULIPs is the flexibility they offer in choosing the type of funds based on individual risk tolerance. Investors can select equity funds for higher returns, opt for debt funds for stability, or choose balanced funds for a well-rounded mix of both.

2. Fund Switch: ULIPs provide policyholders with the valuable option to switch between different fund types, allowing them to adapt their investment strategy in response to changing market conditions or evolving investment objectives. Importantly, this feature comes without incurring additional costs, ensuring flexibility and responsiveness in managing investments.

3. Partial Withdrawal: After the completion of the lock-in period, ULIP holders have the flexibility to make partial withdrawals. This feature is particularly beneficial during financial emergencies, providing policyholders with liquidity. The number of withdrawals and withdrawal amounts are subject to the specific plan chosen, offering tailored options to meet individual needs.

4. Top-ups: ULIPs offer a top-up feature, enabling policyholders to invest additional amounts beyond regular premiums. This flexibility allows investors to increase their contributions in alignment with changing financial needs and life stages. The top-up feature contributes to the adaptability of ULIPs to individual circumstances.

Types of ULIPs

1. Type 1 ULIP Plan: Type 1 ULIP plans offer a fixed sum assured, providing stability to risk-averse individuals. While this feature appeals to those prioritizing financial security, it’s crucial to note that Type 1 plans may come with higher charges. Investors opting for Type 1 ULIPs typically value the assurance of a consistent sum, making these plans suitable for conservative investment approaches.

2. Type 2 ULIP Plan: Type 2 ULIP plans provide investors with the flexibility to choose the sum assured, often accompanied by lower charges compared to Type 1 plans. This flexibility makes Type 2 plans attractive to individuals seeking versatile investment options who are willing to take on slightly more risk for potential returns. The adjustable sum assured in Type 2 plans allows investors to align their insurance coverage with changing life circumstances, adding a dynamic aspect to the policy.

3. Equity Fund: Equity funds are characterized by their primary investment in stocks, offering high growth potential but also carrying high risks due to market fluctuations. These funds are suitable for aggressive investors with a long-term investment horizon who seek substantial growth. Investing in equity funds demands a strategic, long-term approach, making them favorable for investors with the patience and risk tolerance to navigate market volatility.

4. Debt Fund: Debt funds focus on capital preservation and stable returns by investing in bonds and government securities. With lower to moderate risk, debt funds are suitable for investors who prioritize stability and consistent returns. The stability provided by debt funds makes them a preferred choice for risk-averse investors looking for a reliable source of income over time.

5. Balanced Fund: Balanced funds aim to provide a mix of growth and stability by investing in both equities and debt instruments. Offering a balanced approach to risk and return, these funds cater to investors looking for a middle ground between growth and stability in their investment portfolio. Balanced funds serve as a well-rounded option for investors seeking to mitigate the extremes of market volatility while benefiting from their growth potential.

6. Guaranteed Funds: Guaranteed funds assure minimum returns on investments, making them ideal for risk-averse individuals seeking capital protection. However, the returns from guaranteed funds may be lower compared to non-guaranteed plans. Guaranteed funds offer a level of financial security, making them particularly suitable for investors with a low-risk appetite who prioritize the preservation of their invested capital.

7. Thematic Funds: Thematic funds focus on specific themes or sectors, allowing investors to align their investments with particular market trends or industries they believe will perform well. Investing in thematic funds requires a thorough understanding of the chosen theme or sector, making it crucial for investors to stay informed about industry trends and developments.

8. Single Premium ULIP: In single premium ULIPs, policyholders make a one-time lump sum payment initially, providing flexibility and reducing upfront administrative costs. Single-premium ULIPs appeal to investors with a lump sum available for investment, offering the convenience of making a substantial contribution at the beginning of the policy term.

9. Regular Premium ULIP: Regular premium ULIPs involve smaller premiums paid periodically, such as monthly or yearly installments. While easier on the budget, they may take longer to reach wealth creation goals compared to single-premium plans. The periodic nature of premium payments in regular premium ULIPs aligns with the cash flow preferences of investors, offering budget-friendly options for long-term wealth accumulation.

10. Life-Staged ULIPs: Life-staged ULIPs customize their investment strategies based on different life stages, adjusting asset allocation as policyholders progress through various milestones in life. Life-staged ULIPs provide a dynamic approach to investing by adapting to the changing financial needs and risk tolerance of policyholders at different life stages.

Types of ULIP Fees and Charges

1. Premium Allocation Charges: These charges are imposed by insurance providers to cover initial expenses such as underwriting costs, medical tests, and commission charges. These charges shall be deducted upfront from the initial year premium paid by the policyholder. The front-loaded nature of these charges ensures that the insurer recovers the initial administrative and acquisition costs associated with issuing the ULIP.

2. Mortality Charges: Mortality charges are incurred to provide insurance coverage and vary based on factors such as gender, age, health score, and the chosen coverage. These charges are deducted monthly from the invested funds, reflecting the personalized nature of insurance costs. Policyholders pay mortality charges to ensure that the risk associated with providing insurance coverage aligns with individual risk profiles.

3. Fund Management Charges (FMC): FMC constitutes fees paid to the fund manager responsible for actively managing market-linked funds within the ULIP. These charges are integrated into the net asset value (NAV) of the fund and are subject to a maximum limit set by regulatory authorities. FMC reflects the compensation for the expertise and efforts involved in dynamically managing the investment portfolio for optimal returns.

4. Policy Administration Charges: Policy administration charges are fees levied by insurance providers to cover administrative costs related to policy maintenance, paperwork, record-keeping, and other administrative tasks. These charges can either be fixed or a percentage of the total fund value, contributing to the ongoing operational expenses of managing ULIPs.

5. Fund Switching Charges: Fund switching charges come into play when policyholders decide to switch between different fund options within a ULIP. While some switches may be free up to a certain limit, additional switches may incur charges set by the insurer. These charges reflect the cost of facilitating policyholders’ decisions to reallocate their investments based on changing market conditions or personal preferences.

6. Premium Redirection Charges: Premium redirection charges are imposed if policyholders choose to redirect their future premiums to different funds within the ULIP without altering the existing fund structure. Insurers may levy these charges to cover administrative costs associated with the redirection process. Policyholders should be aware of these charges when considering adjustments to their premium allocations.

7. Surrender or Discontinuance Charges: Surrender or discontinuance charges are applied if a policyholder decides to terminate their ULIP prematurely. The amount charged varies depending on when the surrender occurs and is typically a percentage of the fund value or premium paid. These charges are implemented to compensate for the financial impact on the insurer when a policy is discontinued before the intended tenure.

8. Partial Withdrawal Charges: Policyholders can make partial withdrawals from their ULIP after a specified period, but these withdrawals may attract penalty charges set by the insurance company. Partial withdrawal charges are imposed to discourage premature access to funds and ensure the stability and long-term sustainability of the ULIP.

How to Choose the Best ULIP?

1. Optimize ULIP Fund Options for your Goals: When selecting ULIP fund options, tailor your choices to align with your financial objectives and risk tolerance. Choose between equity funds, debt funds, or a balanced mix based on your preferences. While equity funds present high growth potential with increased risks, debt funds offer stability with limited growth potential.

2. Determine Adequate Life Insurance Cover: Optimal life insurance coverage is paramount to safeguarding your financial future. Evaluate your long-term financial goals and choose a life insurance policy that provides adequate protection for your dependents in unforeseen circumstances.

3. Embrace Long-Term Investment with ULIPs: ULIPs are structured for long-term investments, allowing investors to capitalize on compounding returns over time. Staying invested for an extended period is key to maximizing wealth accumulation through the potential growth of your investment portfolio.

4. Navigate the Landscape of ULIP Charges: Understanding the various charges associated with ULIPs is crucial for informed decision-making. Familiarize yourself with policy administration charges, premium allocation charges, mortality charges, fund management charges, and other fees that may apply.

5. Leverage Tax Benefits Offered by ULIPs: ULIPs provide tax-saving benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961. To optimize your investment returns, take advantage of these tax benefits by aligning your ULIP investment with your tax planning strategy.

Which Investor Class is Ideally Suited for Investments in a ULIP Plan?

1. Long-Term Investment Horizon: For individuals with a proclivity for long-term investments and the patience to stay committed over an extended period, ULIPs prove to be a fitting choice. The inherent structure of ULIPs facilitates the harnessing of compound returns and navigating through market fluctuations, ultimately contributing to the potential growth of the investment portfolio.

2. Risk-Tolerant Investment Approach: ULIPs attract investors who are comfortable with assuming higher risks in pursuit of potentially higher returns, particularly when opting for equity funds within the ULIP structure. While equity funds offer commendable growth potential, they do so amid market volatility. This makes ULIPs an appealing avenue for risk-tolerant individuals seeking a balanced exposure to market dynamics.

3. Goal-Oriented Financial Planning: Investors with well-defined financial goals, be it retirement planning, wealth creation, funding children’s education, or legacy planning, find ULIPs to be versatile instruments that align seamlessly with their objectives. By combining insurance coverage with investment growth, ULIPs empower goal-oriented investors to work towards achieving their specific financial milestones.

4. Flexibility for Customized Investment: ULIPs cater to individuals who value flexibility in their investment approach. Whether it’s the option to switch between funds, redirect premiums, or make partial withdrawals, ULIPs offer a spectrum of features that allow investors to customize their strategies based on evolving financial needs. This adaptability ensures that investors can navigate changing market conditions and align their portfolios with their current priorities.

5. Tax-Efficient Wealth Accumulation: For investors conscious of their tax liabilities, ULIPs present an enticing proposition. Offering tax benefits under Section 80C and Section 10(10D) of the Income Tax Act, ULIPs serve as a tax-efficient investment avenue. Beyond tax savings, investors can capitalize on the potential for wealth accumulation, making ULIPs an attractive choice for those looking to optimize their returns while adhering to tax-conscious financial planning.

How to Manage ULIP Funds?

1. Long-Term Commitment: Given the mandatory lock-in period of 5 years associated with ULIPs, investors need to embrace a long-term perspective. This commitment is essential for capitalizing on the benefits of compounding returns and effectively navigating the fluctuations of the market over an extended investment horizon.

2. Systematic Transfers: Many ULIPs offer the flexibility of systematic transfers, allowing investors to shift funds from debt to equity ULIP funds. This feature is particularly advantageous for those paying annual premiums. By initiating investment in a debt fund initially and leveraging systematic transfers to move to an equity fund, investors can mirror the principles of systematic transfer plans (STP). This strategy helps mitigate investment risk and is worth considering for those seeking a well-managed transition between fund types.

3. Lifecycle-Based Strategy: Certain ULIPs incorporate a lifecycle-based strategy, automatically adjusting the allocation between equity and debt based on the investor’s age. This strategy proves beneficial for retirement planning within the ULIP framework. Aligning with the investor’s life stage, this automated approach ensures a balanced and age-appropriate distribution of funds, optimizing the investment strategy for long-term goals.

4. Performance Reviews: A crucial aspect of managing ULIP investments is conducting periodic reviews of the performance and prospects of ULIP funds. It is imperative to assess the performance of funds and identify those that underperform or have an overvalued asset class. To address this, investors may need to execute switches from underperforming equity ULIP funds to debt ULIP funds.

Who Should Invest in a ULIP?

1. Versatility for Long-Term Financial Goals: ULIPs stand out as a versatile investment option, accommodating individuals with long-term financial goals across diverse backgrounds. The flexibility inherent in ULIPs caters to the varied needs of individuals, making them a suitable choice for anyone looking to achieve prolonged financial objectives.

2. Wealth Creation and Financial Security: ULIPs emerge as an ideal solution for those aiming to create wealth over an extended period or seeking to ensure financial security for their loved ones. The dual nature of ULIPs, combining insurance coverage with investment opportunities, provides a comprehensive approach to addressing both wealth-building aspirations and safeguarding the financial well-being of family members.

3. Tax Benefits and Varied Lock-in Periods: The appeal of ULIPs extends to individuals with varied investment durations, thanks to the combination of tax benefits and flexible lock-in periods. This feature makes ULIPs suitable for those seeking to invest over different lengths of time. Whether aligning with short-term objectives or committing to a more extended investment horizon, ULIPs offer adaptable solutions to cater to distinct financial planning needs.

4. Retirement and Education Planning: ULIPs emerge as an excellent choice for those aiming to build savings earmarked for critical life stages, such as retirement or funding higher education. These plans provide individuals with a systematic approach to accumulating funds over time. However, determining whether ULIPs suit a particular individual involves a nuanced evaluation considering factors beyond a one-size-fits-all approach.

Benefits of Investing in ULIPs

1. Dual Benefits of ULIPs: ULIPs offer a unique combination of life insurance coverage and investment opportunities within a single plan. This dual benefit ensures not only financial protection but also serves as a platform for wealth creation. This integrated approach aligns with diverse financial goals, making ULIPs a versatile choice for those aiming for a holistic and balanced financial strategy.

2. Flexibility in Fund Switching: Investors can exercise flexibility in ULIPs by seamlessly switching between funds based on market dynamics and personal preferences. This feature empowers investors to optimize their investment portfolio in response to changing conditions. Personalized fund management caters to individual risk appetites, ensuring a dynamic investment strategy that aligns with evolving financial objectives.

3. Tax Advantages of ULIP Investments: ULIP investments bring tax benefits as they qualify for deductions under Section 80C of the Income Tax Act. Moreover, the maturity proceeds and death benefits are typically tax-free, subject to prevailing tax laws. This dual tax advantage enhances the overall appeal of ULIPs as a tax-efficient investment.

4. Premium Redirection for Future Investments: ULIPs introduce premium redirection, allowing investors to direct future premiums into different funds. This unique feature enables investors to alter their future investment strategies without impacting the returns from their past investments.

5. Top-Up Option for Enhanced Investment: ULIPs provide a top-up option, allowing investors to inject additional funds into their existing plan at any point during the policy lock-in period. This flexibility caters to changing financial needs and investment goals.

6. Lock-in Period for Strategic Investment Growth: With a lock-in period ranging from 3 to 5 years, ULIPs provide investors with a strategic timeframe to accumulate returns and foster the growth of their investments. This duration aligns with long-term investment objectives.

7. Partial Withdrawals for Financial Preparedness: ULIPs offer the advantage of making partial withdrawals even during the lock-in period. This unique feature ensures that investors can access funds in case of emergencies, maintaining financial preparedness while benefiting from the investment plan.

How to Maximize Returns from a ULIP?

1. Strategic Asset Allocation for ULIP Investments: Distribute your ULIP investments strategically across diverse asset classes, including equity funds, balanced funds, money market funds, and fixed-interest debt funds. This approach serves to diversify risk effectively and holds the potential to enhance returns over an extended period.

2. Embrace Long-Term Commitment to ULIP Investment: Commit to long-term investments in ULIPs to leverage the power of compounding. This financial principle significantly amplifies returns over an extended period, providing a robust foundation for wealth accumulation.

3. Timely Premium Payments for ULIP Growth: Ensure the punctual payment of premiums to sustain the active status of your ULIP. Timely premium payments are pivotal for maximizing the growth potential of your investment throughout the policy.

4. Efficient Fund Switching for ULIP Optimization: Optimize the use of free switches between funds provided by ULIPs to manage asset allocation effectively. This strategic approach allows investors to adapt to changing market conditions, ensuring the ongoing optimization of their investment portfolio. Leveraging free switches enhances flexibility, empowering investors to reallocate funds in response to evolving market dynamics.

5. Goal-Oriented ULIP Investing: Align your ULIP investments with specific financial goals, such as retirement planning, education funding, or wealth creation. This goal-oriented approach ensures focus and facilitates the achievement of desired outcomes within defined timeframes.

6. Regular Review and Rebalancing of ULIP Investments: Regularly review and monitor your ULIP investment plan, making necessary adjustments to realign it with your financial objectives. This proactive approach ensures ongoing optimization to maximize returns. Regular monitoring ensures that the ULIP investment remains in sync with market trends, providing opportunities for strategic rebalancing and optimization.

7. Leverage Tax Benefits for ULIP Efficiency: Maximize the tax benefits associated with ULIP investments under Section 80C of the Income Tax Act. This strategic utilization enhances overall tax efficiency and contributes to the optimization of returns. Strategically utilizing tax benefits under Section 80C creates a tax-efficient investment environment, maximizing the overall returns within the ULIP framework.

Withdrawing Funds from ULIPs

1. Lock-in Period in ULIPs: ULIPs impose a mandatory lock-in period of 5 years, during which partial withdrawals are prohibited. Withdrawal of funds before the conclusion of the lock-in period is not permissible. The lock-in period safeguards the investment commitment for a specific duration, promoting a disciplined and long-term approach to ULIPs.

2. Partial Withdrawals After Lock-in Period: After the lock-in period, ULIP holders can make partial withdrawals. The minimum withdrawal amount typically ranges from ₹1,000 to ₹2,000, depending on policy terms. Withdrawals are capped at approximately 25% of the fund’s value, provided one year’s premium remains in the fund.

3. Impact on Sum Assured and Premium Payments: Withdrawals from ULIPs result in a temporary reduction in the sum assured for two years. Subsequently, the sum assured automatically reverts to its original amount. Continuous premium payments are required to be eligible for partial withdrawals.

4. Taxation of Withdrawals: Amounts withdrawn from ULIPs after completing the lock-in period enjoy tax-exempt status. This tax benefit provides an avenue for utilizing accumulated funds in ULIPs to fulfill immediate life goals. Tax-exempt withdrawals after the lock-in period enhance the efficiency of ULIPs as a financial tool, allowing investors to access funds without tax implications.

5. Emergency Withdrawals and Nominee Payouts: In cases of emergencies, partial withdrawals are permitted. However, the reduced sum assured due to prior withdrawals will be paid to the nominee. Emergency withdrawals offer a safety net but come with the consideration of potential reductions in the sum assured, impacting the payout to the nominee.

6. Surrender or Discontinuation Implications: Even in the event of surrender or discontinuation of the ULIP policy, access to funds remains restricted until the conclusion of the lock-in period. Surrendering or discontinuing the policy does not grant immediate access to funds, reinforcing the commitment of the lock-in period and its impact on liquidity.

Busting ULIP Myths

1. ULIPs as High-Risk Investments: Contrary to common belief, ULIPs, while possessing market-linked risk, are not as inherently high-risk as perceived. Effective risk management involves selecting appropriate fund options and diversifying investments across various asset classes. Strategic fund selection and diversification mitigate the perceived high-risk nature of ULIPs, allowing investors to tailor their risk exposure based on individual preferences and financial goals.

2. Risk Perception: ULIPs are not inherently risky, despite their association with equities. The investment component’s link to equities may carry risk, but the life insurance coverage within ULIPs acts as a safety net, providing a safeguard for policyholders. ULIPs strike a balance by integrating the risk potential of equity-linked investments with the protective element of life insurance coverage, offering a comprehensive financial solution.

3. Return Potential: While ULIP returns are not guaranteed, dismissing them as low-return investments is a misconception. Being market-linked, ULIPs, especially when invested in equity funds, have the potential to yield high returns over the long term. Understanding the market-linked nature of ULIPs enables investors to appreciate their return potential, particularly in the context of long-term investment horizons and strategic fund choices.

4. Life Cover Adequacy in ULIPs: ULIPs extend beyond mere investment plans; they incorporate life insurance coverage. The adequacy of life cover within a ULIP is determined by factors such as the policyholder’s age, health, and the chosen sum assured, rather than being contingent on market performance.

5. Surrender Possibility and Implications in ULIPs: Contrary to the belief that ULIPs cannot be surrendered before maturity, surrender is an option, albeit with associated charges and tax implications. The surrender value typically exceeds the surrender charges, making it a viable choice for policyholders requiring early access to funds.

Difference Between ELSS and ULIP

Basis	ELSS	ULIP
Investment Objective	Primarily in equities for capital appreciation	Combines investment and insurance components
Lock-in Period	3 years	5 years
Tax Benefits	Up to ₹1.5 lakh under Section 80C	Tax exemption on maturity sum under Section 10(10D)
Liquidity	More liquidity with a 3-year lock-in	Longer 5-year lock-in restricts early withdrawals
Flexibility	No fund-switching flexibility	Allows fund switches based on risk appetite and market conditions
Expense Ratio	Typically, lower expense ratios	May have higher expense ratios and be potentially less cost-effective
Life Coverage	Does not offer life insurance coverage	Provides life insurance coverage for financial security
Market Risk	Subject to market fluctuations and potential losses	Offers potential for higher returns but carries market risk

Frequently Asked Questions (FAQs)

Is ULIP market-linked?

Yes, ULIP is a comprehensive plan that combines insurance coverage and investment opportunities. Unlike traditional life insurance policies, ULIPs offer the chance to earn returns linked to the market.

Can we discontinue ULIP?

If you choose to discontinue your existing ULIP policy, you have the option to surrender it. However, it’s important to note that the Insurance Regulatory and Development Authority (IRDA) has established a mandatory lock-in period of 5 years for ULIP policies.

Does ULIP offer guaranteed returns?

No, ULIPs will not give assured or guaranteed returns. Being a ULIP, the investment risk in the portfolio is endured by the policyholder.

Is ULIP bad or good?

ULIPs can be a beneficial investment choice. They offer significant tax advantages under Section 80C of the Income Tax Act, allowing deductions on premiums paid. Additionally, the death benefits and maturity proceeds from ULIPs are tax-free and subject to prevailing tax laws.