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10 FAQs About ULIPs

Updated On Nov 08, 2021

ULIPs seem to be well amongst consumers as a terrific tool for creating investment habits and providing members with flexibility. As a result, investors are unconcerned about these programs because they are flexible enough to match your investing ambitions.

We've answered the 10 Most Commonly Asked Questions about ULIPs in this article.

10 FAQs About ULIPs

The following are the most common questions that all investors have while considering a ULIP investment:

1. Is There A High Level Of Risk In ULIPs?

The premium paid in unit-linked life insurance plans is susceptible to capital market volatility, and the Unit Price of the units may rise or decline depending on the performance of the fund and other factors influencing the capital market and the assured/policy. As a result, these strategies ensure a better rate of return.

2. Do ULIPs Allow Partial Withdrawal?

ULIPs allow investors to withdraw funds from their accounts to cover unforeseen expenses, thereby creating an emergency fund.

The money can be taken out in one single payment or in installments. In other cases, however, the policy stipulates that the life guaranteed must be at least 18 years old to make withdrawals.

3. Is It Possible For An Investor To Switch Funds In A ULIP?

You can switch units between your investment funds based on your risk tolerance and investing preferences. ULIPs are basically combined investment and insurance products with a wide range of investment terms and conditions. This aspect of fund switching helps to protect your returns by insulating them from market fluctuations and the subsequent expected reduction in fund performance.

4. How Do ULIPs Help With Taxes?

Under sections 80C and 10 of the Income Tax Act, you may be eligible for tax benefits on the premiums you pay for ULIPs (10D).

Investors can benefit from higher profits based on current market conditions with these strategies.

5. What Are The ULIPs' Exclusions?

If the policyholder dies by suicide during 12 months of the policy's start date, the candidate or receiver is eligible for the premium upgrade account balance and top-up premium cash value, as applicable on the day of notice of death.

6. What Does ULIPs' Top-Up Feature Mean?

Additional contributions can be made in addition to the normal premiums if the possibility is indicated in the Policy. In ULIPs, this is referred to as the Top-Up Feature.

7. How Long Do These Plans Have A Lock-In Period?

The policyholder cannot receive the proceeds of the policy until the policyholder dies or the policy's covered events occur, which is a 5-year term beginning on the policy's commencement date. During this time, the benefit of partial withdrawal is not available.

8. Is ULIPs Appropriate For Long-Term Investing?

ULIPs are popular among investors as a long-term investment option. Even so, when compared to their contemporaries, these plans' net returns are impressive. In the right circumstances, these programs work well and provide good long-term returns.

9. What Kind Of Flexibility Do ULIPs Provide?

The following is a list of the types of flexibility offered by ULIPs:

1. Switching: You can move your accumulated funds from one fund to another at any moment.

2. Premium Redirection: Depending on your needs, you can direct future premium payments to alternative funds. In any policy year, the first four premium redirections are free. Premium redirections that have not been used are not transferable.

10. What Happens If ULIP Premiums Are No Longer Available?

If an investor does not make a timely payment, he or she has the option of choosing one of the following options.

  • Boost the policy's effectiveness.
  • Withdraw the policy completely, leaving you without risk coverage.
  • The policy will be declared void and the assurer will no longer offer risk coverage if the policyholder does not exercise the preceding options within 30 days.


The volume of information available on the internet makes it easy to be swayed. As a result, understanding the precise components of your insurance plan before making a decision is crucial. The information in the preceding article will assist you in this endeavor.

Also read - Is ULIP a better investment than mutual funds?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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