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What Is A Unit Linked Insurance Plan?

Published On Nov 12, 2021 1:00 PM By InsuranceDekho

A ULIP is a type of insurance that combines investing and insurance into one package. A Unit Linked Insurance Plan, or ULIP, combines the benefits of wealth building with the protection of your loved ones' future. ULIPs allow you to grow your money using standard wealth-building methods while also providing you with the protection of comprehensive life insurance. As a result, investing in a ULIP might provide you with the most protection against life's unpredictability. ULIPs allow you to invest in either equities or debt funds, depending on your risk tolerance, and the investment returns are determined by the performance of the funds. While the maturity benefit is subject to market risks, the insurance coverage provided by a ULIP is not.

A Unit Linked Insurance Plan (ULIP) is a form of Life Insurance policy that combines investing and insurance advantages. ULIPs give you the chance to build money while also providing life insurance protection. ULIPs are financial vehicles in which you invest your money (equity, debt, or a combination of both). The performance of the funds you choose determines the returns on your investment.

What Is A Unit Linked Insurance Plan?

 Below are a few things to know about a ULIP:

  • Dual Benefit

ULIPs provide you with not only life insurance but also the possibility to build wealth. You can earn market-linked returns by investing in ULIPs. ULIPs serve as a comprehensive financial instrument because of this dual benefit.

  • You Have The Choice To Select Your Investment Strategy

You can invest your money in a variety of ways, depending on your risk appetite.

  • Investors who are willing to take on a lot of risks might consider investing in equity funds.
  • Moderate risk-takers might use a balanced approach to invest.
  • Debt funds are a good option for low-risk investors.
  • An investor can make changes to his portfolio based on market conditions.
  • Benefits From Taxation

Premiums paid towards a ULIP are eligible for a tax deduction up to Rs 1,50,000 under section 80C. The policy's returns are also eligible for an income tax maturity benefit if certain conditions are met under Section 10(10D) of the Internal Revenue Code.

Note that ULIP issued on or after February 1, 2021, with annualized premiums above Rs. 2.5 lakh would not be excluded under Section 10 of the Act. Note that ULIPs are issued on or after February 1, 2021, with an annualized premium of more than Rs. 2.5 lakh will not be excluded under Section 10(10D) of the Income Tax Act, and any profit from such a high-value ULIP will be taxed as a capital gain under the Income Tax Act.

  • Switching

Transferring investments from one fund to another is referred to as switching. If your investing strategy changes throughout the plan's term, you can change your investment funds for free up to a certain amount in one policy year by using the switching facility.

  • Partial Withdrawals

A feature of ULIPs that is not found in other insurance plans is the ability to make partial withdrawals. After the first five years of the plan, this withdrawal can be made at any time, and a limited number of withdrawals are also free.


India has progressed from literally trading bonds under a tree to offering a wide range of financial products that allow an individual to invest his earnings according to his needs, limits, risk appetite, and financial goals. ULIPs, on the other hand, are investments that have the twin purpose of providing insurance as well as producing a profit.

Also read: 10 FAQs About ULIPs

Is ULIP a better investment than mutual funds?

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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