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How Safe Is It To Invest In An ULIP?

Published On Jul 14, 2021 5:00 PM By InsuranceDekho

ULIPs are regarded as a powerful tool for accumulating money. They divide the premiums into two categories: life insurance and investment funds.

For their investing strategy, investors have the choice of choosing between stock, debt, or a balanced portfolio. They also have the option of switching between investment plans during the premium payment process.ULIP plans use risk to generate higher returns. In this article, we have compiled the features of a ULIP plan that make it safe.

What Makes a ULIP Plan Safe?

Following are the features provided by ULIP plans that make it a safe option for investors.

  • Availability of a Five Year Lock-in Period

ULIPs are a good investment instrument because they have a five-year lock-in period built-in, which can help you create a disciplined investment habit.

ULIP plans allow policyholders to invest their premiums in a variety of funds. Because the policyholder cannot withdraw the funds before five years since the starting of the policy, this helps to instil a habit of investing. Since there is no option to withdraw money before five years, the money remains safe and grows over time.

  • Option To Switch Funds

When you invest in ULIPs, you have the option of choosing which funds to put your money into. You can invest in equities funds, for example, if you have a high-risk appetite. This guarantees huge profits at a higher level of risk. Debt funds, on the other hand, are a low-risk option. This lowers the risk quotient.

The ULIP fund switch option can be used several times throughout the policy term to help you take advantage of current market conditions.

  • Availability Of Partial Withdrawal

Partial withdrawal is a function available in ULIPs. This basically means you can withdraw a specific amount of money from your current reserve. After a five-year lock-in period, this clause is frequently permitted. This allows you to meet unforeseen financial demands using your emergency fund, which you have built up over time, rather than relying on your other assets and resources. This functions as an emergency fund and will help keep you safe in times of need.

  • Management of Funds Through Transparency

ULIPs are sophisticated products that combine risk protection with investment. In terms of underlying expenses and asset allocation, these have a less transparent structure. Since these plans function more transparently, it is easier for the investor to allocate their money depending on the risk conditions.

  • Insurance Cover To Tame The Risk

ULIPs provide a built-in insurance plan that pays the sum assured to the policyholder's family if the policyholder dies during the policy's term. In the case of mutual funds, however, there is no risk cover in the form of insurance. You must purchase a separate insurance policy and pay an additional premium if necessary.


ULIPs are designed to deliver higher returns to investors by reacting to market conditions. These programmes cater to a wide range of financial goals. The risk component in these schemes is explained in detail in the preceding article.

Also Read: 

Term Insurance Riders: Features, Types & Benefits

Can I Avail Tax Benefits On Riders Bought With Life Insurance?

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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