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How ULIPs Help You Invest And Insure?

Published On Oct 28, 2021

A Unit Linked Investment Plan (ULIP) is a popular alternative when it comes to making a financial investment. But what exactly is a ULIP? What distinguishes it from other financial products? What is the procedure for insurance? Let's have a look at what we can find out.

In reality, a ULIP is a hybrid of both insurance and investment. If we were to offer you a more technical and organized definition of ULIP, it would be as follows: A Unit-Linked Insurance Plan (ULIP) is a combination of insurance and investment in which a tiny portion of the premium is used to secure life insurance. So, what occurs to the remaining portion of the insurance premium? Like a mutual fund, the premiums received by the insurance firm selling such plans are pooled and invested in variable proportions of debt and equity instruments. As a consequence, ULIP protects you while also allowing you to grow. 

How ULIPs Help You Invest And Insure?

Below are a few ways in which ULIPs help you invest and insure:

  • Lock-In Period

ULIPs originally had a three-year lock-in period. The lock-in duration was expanded from three to five years by the Insurance Regulatory and Development Authority of India (IRDAI) in 2010. However, even though ULIPs have a 5-year lock-in period, they are a long-term investment, and if you don't have the patience to wait for at least 10-15 years, you will not reap the rewards.

  • Life Cover

This is one of the most important features of life insurance coverage. ULIPs, unlike mutual funds, provide a life insurance policy that is normally equal to the sum covered or the investment's market value (fund value), whichever is greater. This provides your family with financial stability and security, as well as assists them in achieving their objectives.

Benefits from Taxation

One of the most significant benefits of ULIP is the tax exemption. If you show the premiums paid for your ULIP, you can deduct up to Rs. 1,50,000 from your taxable income under Section 80C of the Income Tax Act, 1961.

Furthermore, under Section 10(10D) of the Income Tax Act, the maturity benefit from ULIPs is tax-free.

  • Switch

Do you want to switch between equity and debt funds? The switch is a feature offered by ULIP. You can only use a certain amount of switches before incurring further expenses. Most insurance contracts allow you to make a number of free switchovers throughout the year.

  • Get More

Single premium additions are always available. These enhancements enable you to invest more funds (in addition to the normal premium) as and when needed. It is, however, subject to specific circumstances, and the terms and conditions of various insurance policy firms vary.

  • Withdrawing in Parts

You can always use the partial withdrawal option provided by Unit Linked Insurance Policies if you need to pay for sudden expenses such as your child's 10th, 12th, or graduation fees, or any other emergency. The majority of partial withdrawals are free. However, you should double-check with your insurance company.

  • Riders

Not happy with the returns or perks you've received? You can always add riders to your plan that will assist you to achieve your financial objectives. You can make your ULIP more beneficial to you by adding riders. The Unit Linked Accident and Disability Benefit rider is a popular option. It raises the amount of Life Cover that the family receives in the event of unintentional death. It also assures that your Life Coverage remains in the event of an accident-related disability. 

  • Better Returns

ULIP is for you if you seek better returns than conventional insurance policies. Because of their equity advantage, ULIPs provide higher returns than any other insurance product. ULIPs invest your premium in a variety of asset types through various funds. Though tax-saving funds have a track record of providing double-digit returns, one key benefit is that you don't have to seek a new fund every year. With ULIPs, however, this is not the case. Renewals in ULIPs take care of tax savings.


Life insurance and savings at market-linked rates are combined in unit-linked insurance plans. As a result, you can invest your money to make larger returns while still protecting yourself. Investing in unit-linked insurance plans encourages people to save and invest on a regular basis, which is critical for long-term wealth accumulation.

Also read: 

Things You Need to know About ULIP Before Investing in it

5 ULIP Charges You Must Know About

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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