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Do You Want To Invest And Insure? Buy A ULIP!

Published On Jan 05, 2022 10:00 AM By InsuranceDekho

The term "unit Linked Insurance Plan" (ULIP) refers to a type of insurance that is linked to a specific asset The word "Unit Linked" refers to the fact that one's funds in a ULIP are invested in the stock market or the debt market, and thus are linked to the stock market. Each insurance company offers a range of ULIPs, such as large-cap, small-cap, debt funds, and others, and customers can choose which fund they wish to invest in based on their risk tolerance. In the same way that mutual funds issue NAV units, ULIPs issue NAV units. The "Insurance Plan" component of the name denotes that in the event of an untimely death, one's family will be covered by insurance. Everything put together is amazing.

Because ULIPs invest in both debt and equity instruments, fluctuating market circumstances frequently force policyholders to abandon their plans in the middle of their term. This is an ineffective strategy that will result in losses. To reap the benefits of ULIP, you must have a long-term goal in mind and refrain from making snap decisions based on market conditions.

Do You Want To Invest And Insure? Buy A ULIP!

Below are the key benefits of buying a ULIP:

1. Diversify Across Funds

One of the most significant benefits of a ULIP is the ability to select the sort of fund or funds in which to participate. Diversify your investable funds between debt, equity, and hybrid funds to maximize your returns. You will be somewhat protected from market volatility in this manner.

2. Recognize When To Utilize The Fund Switch Option

ULIPs allow you to swap the amount of money you invest between different types of funds in order to maximize your profits. You can achieve this by balancing your equity-debt mix in such a way that market volatility does not deplete your investments.

It is, however, critical to understanding when to employ the fund switch option. It can be harmful to your investments if you use it at the incorrect moment.

3. Don't Give Up Your ULIPs In Haste

Don't rush to sell your ULIPs in the case of a market crash. In fact, a market crisis is a wonderful moment to keep paying a premium for a product like ULIP that offers high long-term returns. At a lower net asset value, you can buy more units. Your fund's value will climb when the market recovers and its net asset value rises, offering you better returns. ULIPs are an excellent choice for anyone seeking both life insurance and investing opportunities, thanks to their dual benefits. If you do decide to get a ULIP, make sure you stick with it until the finish. You will only be highly rewarded if you do this. Discontinuance will only harm your finances and prevent you from achieving your goals.

4. Don't Aim For Short-Term Gains

Persistence pays well when it comes to getting the most out of ULIP. Bonus units are available in some plans, either at maturity or after a certain amount of time has passed. If you stop servicing your insurance during the policy's term, you will not be entitled to these units.

Always keep a long-term perspective in mind when investing in ULIPs, and be prepared to stick with them the entire time. There's a chance you'll be disappointed if you're seeking quick cash.

5. Benefit From The Tax System

The Income Tax Act of 1961 exempts ULIPs from paying taxes.

  • Premiums are exempt under section 80C.
  • Maturity proceeds are excluded under Section 10 of the Act (10D)
  • Proceeds received as a result of the policyholder's death are exempt under section 10. (10D)
  • The premiums, however, are limited to a maximum of 10% of the sum assured. Any amount in excess of the 10% limit will not be allowed as a deduction under section 80C.


A life insurance product is known as a unit-linked insurance plan, or ULIP provides risk protection as well as investment alternatives for the assured. A portion of the money is invested in stocks, bonds, and other comparable assets, while the remainder serves as a life insurance policy for the assured.

Do read - What Makes A ULIP An Ideal Purchase?

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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