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Are ULIPs Safe For Investment Purposes?

Published On Oct 28, 2021

ULIPs have a five-year lock-in period. It's a good idea to keep track of them for that long. According to the market regulator's standards, mutual funds had to be reclassified last year. As per industry analysts, this had no impact on ULIPs because they are regulated by India's Insurance Regulatory Development Authority (IRDAI). Regardless of how much you've put in, the insurance regulation has already established a cap on charges and a net reduction in yield for investors, ensuring that ULIP returns remain unaffected.

Are ULIP’s Safe For Investment Purposes?

The following are the five benefits of ULIPs that constitute them a stable investment alternative:

1. First Time Investors

Those who are considering their first capital commitment.  With the movement in investment trends toward market-linked investment products and insurance policies, it makes perfect sense for first-time consumers to obtain a ULIP, which integrates income and coverage into one policy.

2. Potentially Higher Profits

ULIPs can offer superior yields than typical insurance plans due to their equity advantage. A ULIP's premium is invested in various funds across multiple product categories. Generally, they have generated double-digit returns while also delivering tax benefits.

The maturity value, on the other extreme, is linked to the performance of the stock market over the term. Endowment plans, on either hand, provide such a lump sum price at the end of the policy term, but they do not provide inflation-beating returns or preserve the money. The fact that the maturity payment is tax-free is the best aspect, making ULIPs a solid investment option than other options. Although there is a lock-in term with FDs, they offer tax-free advantages. The given returns, on the other hand, are added to your earnings and are chargeable at your tax rate.

3. Lock-in Period

ULIPs have a five-year lock-in term and help investors learn to manage their money. Investing in a single ULIP can be beneficial as it is a long-term insurance plan. You simply have to acquire it once, and the tax advantages are available every year until the insurance terminates (premium term). The ULIP's lock-in period begins on the date the guideline is released. ULIP coverage premiums can be paid annually or monthly.

4. Flexibility 

Investors prefer ULIPs since they permit them to switch between funds at any moment during the policy's term. You can choose from stocks, growth, balanced, and mutual fund, according to your objectives and risk attitude. In most circumstances, you are granted four free switches each year. Unlike shares, ULIPs do not need you to keep track of the companies in which the fund invests. Simply select a ULIP, alter your budgetary allocation at any time throughout the policy's term, and hold the strategy until maturity to realize long-term benefits.

5. Dual Benefits

ULIPs are a good long-term investment option because they provide a tax-exempt status of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. Investors under the age of 45 have previously been granted a minimal sum assured equal to 10 times the annual premium. Additionally, the New IRDAI guidelines have made Unit Linked Investment Plans significantly more investor-friendly than they were when they were first founded. Other charges have been reduced as well, including investment management expenses, priority distribution fees, administration costs, and resignation fees.


It's crucial to think about your financial goals, your portfolio, and your risk tolerance before investing. Because the plan has a five-year lock-in period, it's a good idea to assess your own financial capabilities and ambitions, as the insurance provider will charge you if you cancel before the lock-in time is up. As a result, ULIPs are only suitable for long-term investing. As a result, because the risk involved with ULIPs is significant, it is recommended that you evaluate your risk appetite and financial portfolio. Furthermore, because just a small percentage of your premium goes toward life insurance, you should be sure that the coverage is adequate for you.

Also read - 5 ULIP Myths Debunked

Understanding The Basics Of ULIP Investments

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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