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Different Types Of Funds ULIPs Invest In

Published On Sep 24, 2021 7:39 PM By InsuranceDekho

ULIPs are not like traditional insurance plans in that they are subject to risk factors. The life assured is accountable for his or her actions, and the premium paid in Unit Linked Life Insurance Policies is exposed to investment risks connected with capital markets. The NAVs of the units may rise or fall depending on the performance of the fund and variables influencing the capital market. For details on the associated risks and expenses, please visit your insurance agent, middleman, or the life assured's policy document. In a ULIP, the policyholder bears the investment risk.

Different Types Of Funds ULIPs Invest In

Below are the different types of funds ULIPs invest in:

1. Equity

The money from the investors is used to buy stock in one or more companies. Because they are directly tied to financial market swings, equity investments are significantly riskier. The opportunity for expansion, on the other hand, is higher. As a result, ULIPs that invest in equity is appropriate for risk-averse individuals.

2. Debt

The funds are invested in debt instruments like debentures, corporate bonds, government bonds, and securities, and fixed income bonds under various forms of Unit Linked Insurance Plans. While these instruments have a moderate to low risk, they also have moderate returns.

3. Liquid Funds

These ULIPs invest in highly liquid money market products like Treasury bills, call money, and certificates of deposit, making them ideal for accomplishing short-term financial goals (CD). These funds, unlike other ULIPs, have a shorter maturity time, usually ranging from a few weeks to a few months. The majority of these ULIP investments have high credit ratings, making them a risk-free investment for those with a low-risk tolerance.

4. Balanced Funds

Some ULIPs invest in a combination of equities and debt securities in an attempt to reduce risk. The risk is effectively dispersed across high-risk and low-risk investment options by allocating one portion of the money to equity and the other to fixed-income debt instruments. As a result, balanced fund returns are more consistent and less volatile than pure stock fund returns.

5. Cash Funds

Term deposits, cash deposits, and market funds are all examples of low-risk cash fund products that Unit Linked Insurance Plans use to invest their money. While the returns on these ULIPs are the lowest of all the possibilities, the risk is also the lowest. As a result, they're an ideal alternative for risk-averse investors who want to minimize risk.

6. Wealth-Building ULIPs

Unit Linked Insurance Plans are also divided into categories based on their ability to generate money. These strategies are designed primarily to maximize your investment's return on investment.

7. Single-Premium And Regular Premium ULIPs

A single premium ULIP requires only a single premium payment at the time of purchase, as the name suggests. A regular premium ULIP, on the other hand, allows you to pay premiums on a regular basis from the time you buy the policy until it matures. You can pay your premiums in monthly, quarterly, semi-annual, or annual instalments, depending on your financial circumstances.

Also read Do ULIPs Allow Partial Withdrawal?


Profits from a ULIP investment of up to Rs 2.5 lakh in annual premiums will be tax-free. According to a recent amendment, if an investor's annual investment exceeds Rs 2.5 lakh, he or she must specify the nature of the funds in order to determine their taxability.

When ULIPs have at least 65 per cent of their liabilities inequities or at least 90 per cent of their assets in equity, they will be treated the same as equity mutual funds.

Also read How to Compare & Buy ULIPs in India?

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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