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5 ULIP Myths Debunked

Published On Oct 27, 2021

Because ULIPs are one of the most mis-sold products, there are a lot of misconceptions about them.
ULIP has struggled to achieve acceptability, even after the updated product plan, due to all of the incorrect image production and rumors. Many policyholders have either purchased the incorrect plan or surrendered the plan too quickly, resulting in a financial loss. As a result, ULIP has a poor reputation.
Today's post, on the other hand, will assist in debunking some of the ULIP falsehoods that have been circulating for quite some time.

5 ULIP Myths Debunked

Below are the 5 ULIP myths:

1. ULIPs Are Not A Viable Investment Option

Unit Linked Insurance Plans (ULIP) are a type of life insurance that allows you to invest and grow your money. Indeed, ULIPs provide a plethora of investment options. You can invest in ULIPs based on your risk tolerance. Through the investment funds available, one can invest in large-cap funds, mid-cap funds, small-cap funds, or a mix of them. You can invest in any of the following: equity, loans, hybrids, bonds, or the market. ULIP is also versatile and adaptable. 

It allows you to adjust the terms of premium payment, the amount assured, and the frequency of premium payments. You may also personalize with the help of ULIP riders. If you want to achieve long-term objectives, you must, nevertheless, intervene. ULIPs aren't designed to be used for short-term investing. ULIPs are for those seeking a long-term financial investment with high returns, such as 10 years or more.

2. ULIPs Have A Three-Year Lock-In Term

The lock-in time was changed from three to five years after 2010, according to IRDA's updated regulation. According to the new regulation, it favors those seeking a large sum assured and minimal beginning charges, as well as those seeking larger returns through fund investments.

3. There Are Several Fees, And The Overall Amount Of Money Invested In Funds Is Insignificant

There were a lot of charges, to be sure. Charges with a greater percentage bar were loaded upfront. These flaws in previous offerings hampered policyholder profits by preventing investment benefits. However, the improved products, which follow IRDA criteria, allow policyholders to benefit from their investments. In most cases, charges accounted for over 60-75 percent of the first-year premiums under the previous structure. These charges are now evenly distributed over a five-year period, thanks to recent amendments (lock-in period). As a result, from the first-year forward, a significant amount of the premium is invested. Furthermore, the IRDA-mandated fees or charges are the highest that an insurance company can charge, so you should shop about before purchasing a ULIP to get a better bargain.

4. ULIP Switching Prices Are Excessive

No, there are no fees associated with changing funds. Many insurance carriers provide up to 24 free switchovers each year. When comparing ULIPs among insurers, make sure to look at the number of free switches available. We hope that we have debunked the most frequent misunderstandings about ULIPs so that you can better understand how they function and get a decent bargain. So, keep your money in the bank and reap the benefits!

5. ULIP Is Too Pricey To Use In An Emergency And Isn't A Liquid Instrument

As previously stated, the charges have now been evenly divided across the 5-year lock-in period, allowing the policyholder to leverage their investment. ULIPs should no longer be viewed as an expensive product; rather, they should be viewed as a long-term investment with many possibilities to choose from depending on one's risk appetite. Furthermore, a ULIP is a product that allows you to see your investment in full transparency. Don't be concerned if you believe your money will become stuck. 

Because ULIP allows for some switching flexibility over time. You can swap if your funds are not underperforming. And put your money where you expect to make more money. If you run out of cash in an emergency, you can always withdraw a portion of your money. After the lock-in time expires, ULIP allows for partial withdrawal at no cost. Even if you take a partial withdrawal, the remaining units remain in your account and you remain invested.


Unit Linked Insurance Plans, or ULIPs, are insurance policies that combine the benefits of saving and protection into one instrument. It also teaches you about the many investment alternatives in liquid assets, fixed income instruments, and shares. A ULIP has a death benefit, which is the amount paid to the nominee if the policyholder dies while the policy is active. A maturity benefit is paid to the policyholder if he or she lives to the end of the ULIP's term.

Also read - Frequently Asked Questions On Taxations Of ULIPs

Can ULIPs Be Used For Retirement Planning?

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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