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How Does ULIP Helps In Long-Term Wealth Creation?

Updated On Dec 06, 2021

A Unit Linked Insurance Plan, or ULIP, is a pattern of insurance that is tied to market performance. ULIPs are mutual investment vehicles in stocks and bonds and earn market-linked returns. It's also a good way to develop long-term wealth. A ULIP could also be used to save for long-term financial goals including kids’ future, wedding, and other similar expenses.

Premiums are pre-determined by the insurance provider and can be used to invest in ULIPs. In addition, premiums are invested in a variety of securities such as equities and bonds. The fund's value will then fluctuate depending on how the market performs. If the policyholder dies, the fund value or the sum assured is paid out. As a result, even if the investments are insufficient, these insurance policies provide optimal coverage. The available fund value is paid out when the plan matures. As a result, a ULIP provides both insurance and investment returns when the policy matures.

How Does ULIP Help In Long-Term Wealth Creation?

ULIPs have grown in popularity to become one of the most significant investments. For long-term wealth generation, check for the following factors while participating in Unit Linked Insurance plans:

1. They're Flexible

Since you can switch funds during the policy term, ULIPs are particularly versatile. It is, in short, the only economic instrument that allows for such versatility. It allows the guaranteed to move all or portion of their money from one account to the other. You can choose any of them depending on your requirements and the performance of your assets. You can conduct three to four free switches per year. To enjoy long-term rewards, all you have to do is pick a policy, adjust the budget allocated, and continue with that until your strategy ends.

Must Read: Important Parameters To Consider While Purchasing An ULIPs

2. They Also Provide A Slew Of Other Advantages

Following Section 80C of the Income Tax Act of 1961, ULIPs do provide tax advantages. A set of parameters, along with the lock-in duration, maturity advantages, and rate of return, are used to determine the optimum tax-saving choice. You may choose a single payment policy instead of paying in installments. If you have some spare cash, you can put it into your ULIP and reap the benefits in the long run. When further fund units are granted under the plan after a set period has passed, loyalty benefits become available.

3. You Can Switch Funds With Them

ULIPs are incredibly flexible, allowing you to relocate funds at any time during the policy's term. It is, in fact, the only experienced financial that has this capability. It allows the assured to shift their entire or partial investment from one fund to another. Depending on your needs and the efficiency of your cash, you can choose any or all of these. You may easily make 3 - 4 transfers for free each year. To enjoy long-term rewards, all you have to do is pick a plan, adjust the way funds are distributed and stick with it until your policy expires.

4. They Are More Profitable

ULIPs have such a higher chance of achieving a return than other investment avenues since they invest the money you spend in several asset classes. It also allows you to choose a different investment each year based on how well it performs.

5. They Have A Lock-In Period

A solitary ULIP commitment is adequate because ULIPs are long-term investment choices. The lock-in time is typically specified by the policy's issuing date, and the premium is paid in one single sum monthly or annually. In addition, after 5 years, the policyholder has the option of canceling the policy and withdrawing the funds as needed.


At some times in life, everyone requires a specific amount of money. Purchase of a home, education of children, the marriage of children, and retirement life are examples of these. Furthermore, one must pick investment outlets that will meet their financial strategy, taking into account the current rate of inflation. As a result, there are a variety of ways to participate in markets while staying on track with one's financial objectives.

Also Read: What You Should Know About ULIP Tax Benefits?

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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