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Busting Myths About ULIP

Published On Oct 15, 2021

The current Unit Linked Insurance Plans (ULIPs) concept is a mash-up of various fallacies. And ULIP misunderstandings are the result of massive mis-selling of these products in the past when large commissions were paid to individuals who disseminated them early on.

Despite widespread misunderstandings regarding the product's purpose, pricing, returns, liquidity, and operation, the idea of buying a ULIP ranks low among all the investment options that people consider.
Premium payment convenience, low costs, tax advantages, and free switching between funds to maximize returns based on market conditions have led to ULIPs being viewed as investment vehicles that yield high returns when compared to other financial instruments such as mutual funds (MFs), while also ensuring insurance coverage without additional charges.

Busting Myths About ULIP

Following are the myths about ULIP:

1. ULIPs Are Costly

In reality, ULIPs are no longer prohibitively expensive! ULIP premiums have dropped substantially, with some even being phased out.

ULIPs are complex investment vehicles with a high cost of ownership. Because the entire premium is not invested in the unit, people feel ULIPs are pricey. However, multiple dynamics are engaged in a ULIP to generate bigger profits while also providing life insurance, and these additional charges just serve to assist clients in receiving better returns on their investment.

Furthermore, ULIP fees in newer plans are substantially reduced, and some online ULIP providers do not charge premium allocation or policy maintenance fees. The IRDAI has also set a maximum fund administration charge ceiling of 1.35 percent of the fund value, decreasing the cost of investing in ULIPs significantly.

2. Insurance Coverage Will Be Reduced If The Stock Market Crashes

Insurance companies, according to IRDAI, must pay the sum assured or fund value in the case of death or maturity.

A portion of your premiuonclusionm goes toward life insurance, while the balance goes into the connected investment vehicle. Contract principles and IRDAI statutes obligate the insurance company to pay the sum assured or the fund value, whichever is greater, in the case of the policyholder's death. The total assured is usually ten times the annual premium.

3. The Risks Of ULIPs

It is up to you to decide how much danger you are willing to take on. You can either travel quickly, slowly or at a standard speed in a car to arrive at your destination. Driving faster will get you to your destination faster, but it comes with some risks. That's not to suggest that driving a car isn't risky. In the same way, if you want to grow your wealth faster and achieve higher returns, you must take some risks and invest in equity-linked ULIPs. However, if you are risk-averse, you may prefer to be a conservative investor and invest in debt funds, which may have lower returns but provide greater stability.

4. ULIPs Have A Low Return On Investment

Over the course of five years, ULIPs have produced up to 67 percent absolute returns. Due to a lack of awareness, many investors confuse ULIPs with endowment plans and believe they provide low returns. ULIPs, on the other hand, have consistently provided favorable returns to investors. The Pension Advantage Plan of Future Generali Life Insurance was able to reward investors with absolute returns of 67 percent in just five years.

5. The Abolition Of ULIPs Is Not A Possibility

Yes, it is feasible! Another fallacy that keeps people from investing in ULIPs and getting the triple benefits of life insurance, wealth growth, and tax reduction is that they are too expensive. If you terminate a ULIP after the five-year lock-in period has finished, there are no surrender or discontinuance fees.

After the 5-year period, you can withdraw a minimum of Rs.5000 from the Future Generali Easy Invest Online Plan up to four times a year to cover emergency expenses. Make sure you understand all of the costs, the investment horizon, the sum assured, and your investing goals before acquiring a ULIP. If you are clear about your goals, you will stick to your plan longer and build a larger corpus for yourself and your loved ones.


You have the access to the best of all worlds whenever it comes to finances, and ULIPs fulfill these prerequisites. ULIPs offer a tremendous chance for capital growth today. In this way, they combine the benefits of insurance with tax savings. Plus, when you buy ULIPs online, you save money, giving you more money to invest!

Also read - Things You Need To Know About ULIP Before Investing In It

ULIP Is A Smart Investment Choice

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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