ULIP (Unit Link Insurance Plan) – Benefits, Returns, ULIP Plans


Investment is essential in today’s scenario. With escalating prices, anything and everything from education to commodities will become unaffordable if we don’t change our habits soon. ULIP or Unit Linked Insurance Plan is also an excellent way for insurance and investment. ULIP helps you to accumulate small amounts of money regularly, which the insurance company bifurcates towards life insurance and into equity or debt funds. This can go a long way towards catering to your children’s education, future endeavors, retirement planning, or any other future requirement.

 Link Insurance Plan

How Does ULIP Help You?

ULIPs have become one of the safest long-term investment plans. Because of the decreasing value of the rupee and the inflation rate, things are not expected to become cheaper soon. So, it is a smart move to put your eggs in baskets for a brighter future. When you invest in ULIP, the insurance company divides the amount invested into two parts. One aspect of your money is invested in shares or bonds, while the other is used to cover insurance. The insurance company has fund managers to deal with investments for the clients. However, you can switch your investment portfolio between equity and debt if you have time and knowledge about the market and its trends. This facility to change your portfolio is available when you invest in ULIP.

As per IRDAI (Insurance Regulatory and Development Authority of India), the lock-in period for insurance has been changed from 3 to 5 years. However, if you wish to reap maximum benefits from the insurance cover provided by ULIP, you should hold the policy for its entire duration, generally 10-15 years. Know more about the various types and benefits of ULIPs

Types of ULIP

You can categorize ULIPs broadly into three categories –

Based on funds in which ULIPs invest:

  • Equity Funds – The premium paid is invested in the equity market; it is risky.
  • Balanced Funds – Premium paid is balanced between debt & equity market; minimized risk.
  • Debt Funds – Premium is invested in debt instruments; lower risk, lower returns.

Ultimate Use of Funds:

  • Child Education – Long-term goal of saving for funding children’s future education.
  • Retirement Planning – People wishing to invest for a relaxed future while earning.
  • Wealth Creation – Investment to be utilized for accomplishing financial goals.

Death Benefit for Policy Holders:

  • Type I ULIP – The Nominee is paid higher than the assured sum or the fund value in the policyholder’s death.
  • Type II ULIP – The assured sum and fund values are paid to the nominee on the policyholder’s death.

Benefits of Opting for ULIP

  1. Insurance cover: With ULIP, you get insurance cover and investment coupled with it. In the case of the taxpayer’s untimely death, the family is assured of financial assistance security.
  2. Income Tax Act’s Section 10 (10D)!
  3. Flexible investment portfolio: ULIPs allow you to switch your investment portfolio from debt to equity based on your risk-taking ability and knowledge of the market. A few switches are permitted free of cost.
  4. Financial assistance for long-term goals: If you wish to save for buying a house or car or your child’s marriage, ULIP is perfect as you get good returns even after the lock-in period (5 years), compared to investing in FD or your savings account.
Carol P. Middleton
Student. Alcohol ninja. Entrepreneur. Professional travel enthusiast. Zombie fan. Practiced in the art of donating rocking horses for the underprivileged. Crossed the country researching hula hoops in Deltona, FL. Won several awards for supervising the production of etch-a-sketches in Nigeria. Uniquely-equipped for investing in bathtub gin in the financial sector. Spent a year building g.i. joes worldwide. Earned praise for deploying childrens books in Africa.