ULIP Plans in India 2025

ULIPs, short for Unit Linked Insurance Plans, offer a fusion of life insurance and investment. When you opt for ULIP plans, you commit to paying a premium depending upon the premium paying frequency as per your preference.

These premiums are later divided into two parts: one portion goes towards securing life insurance coverage, while the other is allocated for investments. However, before these investments start, various charges such as fund allocation fees, policy administration fees, fund management fees, and mortality charges are deducted from the premium amount.

Once these deductions are made, the remaining funds are invested strategically across different asset classes based on the risk tolerance and preference of the policyholder.

In Unit Linked Insurance Plans (ULIP), the money you invest is affected by how the stock markets perform. This means that there is a chance you might not get back all the money you have invested. So, it is important to understand the associated risk before deciding where to invest your money.

If you are looking to invest in insurance policies that not only provide protection but also serve as investment tools, then the Unit Linked Insurance Plan is an excellent option in which you must put your money. The following are some of the best ULIP plans in India.

When you invest in a ULIP, a part of your paid premium goes towards life insurance, while the remaining amount is invested in multiple funds like equity, debt, or a combination of both, based on your choice. for your information, these funds are managed by professional fund managers.

Let us help you understand this with an example:

If you invest Rs. 1000 in a ULIP plan, a portion of this amount, say Rs. 300, will be allocated towards offering life insurance coverage, which will provide financial protection to your family in case of your unfortunate death. And, the remaining Rs. 700 will be invested in funds as per the investment strategy of your choice.

If the funds perform well over time, your investment will grow to Rs. 1500 after a certain period. The growth in the investment value reflects the performance of the underlying funds.

However, it's important to note that ULIPs also come with charges like premium allocation charges, policy administration charges, fund management charges, etc., which are deducted from your premium before the investment is made. These charges vary across different ULIPs and might impact the overall returns.

There are multiple benefits of buying a ULIP plan, a few of which are listed below:

• Insurance Coverage: ULIPs provide life insurance coverage that offers financial protection for the policyholder's family in case of events like death or disability.

• Investment Opportunity: ULIPs allow policyholders to invest in a variety of funds such as equity, debt, or balanced funds, depending on their risk appetite and financial goals.

• Flexibility: ULIPs offer flexibility in terms of investment and premium payment. Policyholders can choose the premium amount, frequency of premium payments, and switch between different funds based on market conditions or their changing investment objectives.

• Tax Benefits: ULIPs offer tax benefits under the Income Tax Act, 1961. The premiums paid towards ULIPs are eligible for tax deduction under Section 80C, and the maturity proceeds or death benefits are tax-exempt under Section 10(10D).

• Fund Switching: ULIPs allow policyholders to switch between different funds offered by the insurer This flexibility allows investors to optimise their investment portfolio over time.

1. Beneficiaries can avail tax deductions under Section 80C of the Income Tax Act. The maturity proceeds are tax-free under Section 10(10D) of the same.
2. To qualify for this tax benefit, the premium amount should not exceed 10% of the sum assured. If the premium exceeds this threshold, the tax benefit will be limited to 10% of the sum assured.
3. For ULIPs purchased between April 1, 2012, and February 1, 2021, the annual premium paid should be below 10% of the sum assured to qualify for a tax benefit on maturity

Following are the groups of people who should buy ULIP plans:

• Medium/High Investment Goals: Individuals who have medium to high-risk investment goals must buy ULIP plans. Remember, a ULIP plan is not suggested for those who want steady returns in less time.

• Potential Investors: Across all life stages, individuals must consider buying a ULIP plan. Whether you are a young professional or are nearing retirement, you should consider buying a ULIP plan to maximise your savings.

• High-risk Investor: A plan like ULIP is suitable for those who have a high-risk appetite. This is because ULIP involves high market fluctuations and thus should not be bought by those who are financially unstable.

The different types of ULIPs are as follows:

• ULIP for Retirement: This type of ULIP is great if you want to save up money for when you retire. The money you get from these plans is paid out as annuities, which can help you plan for your retirement better.

• ULIPs for Savings: ULIPs are a good way to build up wealth over a long time. By putting your money into this kind of plan, you can prepare for your future and gather a decent amount of money over the years.

• ULIP for Health Benefits: If you face a medical emergency, the money that you have saved up in ULIPs can help you cover the medical or healthcare costs.

• ULIP for Child’s Education: With a ULIP plan designed for children, you can secure your child's future. Moreover, it also comes with a waiver of premium features that helps keep the plan active even if the guardian meets an unfortunate demise.

Types of ULIPs Based on Plan Structure

Following are the different types of ULIPs based on plan structure:

• Regular vs Single Premium ULIP: In a Regular Plan, investors need to pay the premium on a regular basis. On the other hand, in a Single Premium ULIP, investors pay the entire premium in one go.

• Guaranteed vs Non-guaranteed ULIP: Guaranteed Plans focus more on preserving the savings of investors and thus offer lesser returns. While a non-guaranteed ULIP plan invests a large amount of money in the equity market and thus offers great returns in a short period of time.

• ULIPs Based on Life Stages: Based on the different life stages, ULIPs can be classified into equity, debt, or a mix of both. Depending on what time you invest, you can choose a desired type. However, over the years, you need to choose a type that offers stable returns or you can even choose a mix of both equity and debts.

There are different types of fund options available in the market based on risk appetite, investment goals, and more. So, listed below are the different types of funds available with ULIP:

• Equity Funds: These funds allocate investor capital towards purchasing equity shares in one or more companies. They are suitable for people willing to undertake higher levels of risk for potentially higher returns.

• Debt Funds: Funds in this category are invested in debt instruments such as corporate bonds, government bonds, debentures, and fixed-income securities. While the risk associated with debt funds falls in the medium to low range, the returns are moderate.

• Large-cap Funds: This type of fund invests in stocks of well-established companies, usually within the top 100.

• Mid-cap Funds: Unlike large-cap funds, mid-cap funds allocate capital towards medium-sized companies. These companies may pose higher risks when compared to large-cap firms.

• Liquid Funds: Liquid funds invest in highly liquid money market instruments and are ideal for short-term financial goals. The maturity period for these funds typically ranges from a few weeks to a few months.

• Balanced Funds: These funds strike a perfect balance between equity and debt instruments and offer relatively stable returns when compared to pure equity funds.

• Cash Funds: Designed for investors with lower risk tolerance, these offer lower returns but provide a higher level of security.

If you are planning to invest in ULIP, you need to be aware of the different charges associated with it. Some of them are listed below:

• Premium Allocation Charge: It refers to the fees that the insurance company charges to allocate the amount to different types of funds. These charges cover initial expenses like underwriting, agent commissions, etc.

• Mortality Charge: It is the amount that the insurance company charges for providing life insurance coverage under ULIP.These charges vary based on factors like age, gender, and health condition of the policyholder.

• Fund Management Charge: This is the amount that the fund manager charges to regulate or manage your funds.

• Switching Charge: It is the fee charged when you switch from one fund to another.

• Policy Administration Charge: This is the charge taken by the insurance company to provide you with policy-related services.

• Partial Withdrawal Charge: This is the fee charged if you are making partial withdrawals from the invested money.

• Surrender Charges: In case you discontinue your ULIP plan before the lock-in period or the 5th year, then a certain amount of fee is charged which is called surrender charges.

• Premium Redirection Charges: Premium redirection charges are incurred when policyholders redirect their future premiums toward a different fund option within the ULIP.
• Rider Charges: Rider charges are fees imposed for additional benefits or features added to the original ULIP plan.

Buying ULIP plans with InsuranceDekho is easy and quick. Simply follow these steps:

Step 1: Visit the official website of InsuranceDekho, hover on the “Insurance” tab at the top and then select Investment > ULIP Plan.

Step 2: On the next page, fill the form on the ride side with your name, number and DOB and click on “View Plans for Free”.

Step 3: Next, select the “ULIP” option in the top menu and apply other filters as per your requirement.

Step 4: You will find different ULIP insurance quotes based on the details provided. Compare the available plans and select the one that suits your requirements.

Step 5: After choosing your ULIP plan, adjust the sum assured and the policy term. Later, make the premium payment via net banking or debit/credit card.

Step 6: Lastly, submit the required documents like photo ID proof, address proof, age proof, and a passport-size photograph along with required medical records.

After successful submission of documents and approval, the chosen ULIP plan will be issued to you.

Listed below are the key differences between ULIPs and Mutual Funds:

Knowing how to use a ULIP calculator is essential for making smart financial choices. A ULIP calculator is a helpful online tool that can guide you through ULIP policies. It moreover helps you figure out how much to invest and for how long, while also predicting what you might get back as a return on your investment money.

Now, if you want to know how to use a ULIP calculator, then follow these general steps:

Step 1: Start by visiting a reliable website with a ULIP calculator.

Step 2: Once you're on the ULIP calculator page, enter the required details like your age and how much money you want to invest in the ULIP policy.

Step 3: Now, decide if you want to pay all at once or regularly, like once a year, every six months, every three months, or every month.

Step 4: Next, you need to decide how many years you want to invest for. Remember, the minimum lock-in period in the case of ULIP plans is 5 years.

Step 5: After you've entered everything, the ULIP calculator will show you what you might get as a return from your chosen ULIP policy.

NAV, or Net Asset Value, represents the total value of all the assets held within the ULIP fund after subtracting any liabilities and expenses associated with managing the fund.

To calculate NAV, the total value of assets, which may include stocks, bonds, or other securities held within the ULIP fund, is determined. From this total value, any outstanding liabilities or expenses incurred in managing the fund, such as administrative costs or taxes, are subtracted. The resulting figure is then divided by the total number of units outstanding in the ULIP fund.

NAV= ( Market Value of Fund’s Assets − Liabilities ) / Total Number of Units Outstanding

The several misconceptions about ULIPs are mentioned below along with the real facts behind each one of them:

Myth 1: ULIPs are High-Risk Plans

Fact: Contrary to popular belief, ULIPs are not exclusively for high-risk takers. These plans combine insurance and investment, making them a secure option. Additionally, the returns you receive depend on the type of fund you choose.

Myth 2: ULIPs Are Expensive

Fact: Many first-time investors feel that ULIPs are costly. However, this is not true. ULIPs offer plans customised to various budgets, which allows you to start investing even with a minimal amount. Moreover, the charges associated with ULIPs are generally minimal.

Myth 3: ULIPs Lack Flexibility

Fact: ULIPs are highly flexible investment options. Investors can switch between different funds based on their preferences. Additionally, ULIPs offer flexibility in choosing payment frequency, fund withdrawal frequency, and other parameters.

Myth 4: ULIPs Offer Guaranteed Returns

Fact: One prevalent misconception is that ULIPs guarantee returns. However, ULIPs are subject to market risks, and the returns are based on the performance of the invested funds.

Mentioned below are key terms that you should familiarise yourself with before investing in ULIPs:

• Investment Value: This represents the total amount of money you commit to invest in a ULIP plan. This value can be calculated by multiplying the units owned by the Net Asset Value (NAV).

• Assured Sum: This is the guaranteed amount that an insurance company pays to the nominee in case of the policyholder's death.

• Fund Transfer: This denotes the process of reallocating investments from one fund to another within the ULIP structure. Some insurance providers may offer a limited number of complimentary fund transfers.

• ULIP Fees: While purchasing a ULIP, you are required to pay various charges such as mortality fees, surrender fees, and others, which are collectively known as ULIP fees.

Net Asset Value (NAV): NAV represents the value of each unit of your investment, basically the overall value of your fund holdings.