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Why Investing In ULIP Is A Smart Decision To Make?

Updated On Jan 07, 2022

The primary motivation for investing in any financial instrument is to make a profit. As investors, you want to put your money into products that not only pay out well but also fit your risk profile and time horizon. If this describes you, unit-linked insurance plans, or ULIPs, may be a good fit for you.

These products, in addition to providing life insurance, allow you to invest in financial market assets such as stocks and bonds. ULIPs have a variety of advantages that make them an appealing investment option, but the tax benefit associated with them is particularly appealing. ULIPs have a five-year lock-in period, which allows your money to earn better returns over time. In the case of your death, the sum assured is the amount that your nominee will receive.

Why Investing In ULIP Is A Smart Decision To Make?

Below are a few things you must know about investing in a ULIP:

  • ULIPs For Wealth Generation

ULIPs for wealth development is one of the greatest investment alternatives for you if you want to build your corpus over a lengthy period of time. These plans can be used to save money for large financial commitments such as buying a house, paying for your child's further education, retirement, and so on. The added benefit of life insurance provides you with peace of mind, knowing that your family is always secured.

  • Premium Payment Frequencies

One Pay ULIPs - As the name suggests, you only have to pay the premium once during the policy's whole term. You can choose the one-pay ULIP if you have a flat sum to invest.

Regular Payment — In this case, you pay the premium on a regular basis throughout the plan's duration – for example, monthly, half-yearly, or annually, depending on your choices. When compared to one-pay plans, the price for Regular Pay plans is lower.

  • Liquidity

ULIPs typically feature a five-year lock-in period. Liquidity refers to the ease with which an investment can be cashed without affecting its returns. After the lock-in period expires, policyholders can withdraw part or all of their investments in ULIPs.

  • Transparency

One of the most transparent investment options is ULIPs. The fund management fee, policy administration fee, mortality costs, and other charges and fees are all specified in the policy document. In addition, the policyholder is fully aware of the money allocation.

You won't have to worry about any hidden fees or expenses with ULIPs.

  • Tax Benefits

ULIPs provide tax benefits under both Section 80C and Section 10(10D) of the Internal Revenue Code. This means you can deduct both your premium payments and your refunds from your taxes.

  • Mitigation Of Risk

Your money is managed by expert fund managers, which helps you avoid the hazards that come with stock market investing. ULIPs are a fantastic option for individuals who wish to benefit from the stock market's profits but don't want to invest in them directly.

  • Potential For Higher Returns

ULIPs have the potential to provide you with higher long-term returns. Because your money is placed in the stock market, you will earn more money than if you put it in a fixed deposit or a recurring deposit.

  • Top-Up Facility

ULIPs allow investors to diversify their portfolios. This function is referred to as the "top-up" capability, and it allows you to invest any amount above your current premium. Top-ups are also eligible for tax benefits.

For example, if your chosen fund outperforms your initial expectations, you can boost your profits by investing additional money into it whenever available.

  • Switch Facility

This feature allows you to switch the investment ratio from one fund to another. If you want more stock exposure, for example, you can raise the ratio of money allocated to equities, and vice versa.

Investors can use the switch facility to adjust their assets based on their shifting investment horizons and risk appetites.


A unit-linked insurance plan, or ULIP, is a market-linked insurance product that involves the combination of investments and insurance into a single package. A ULIP is linked to market results and gives you the freedom to invest in both equities and debt portfolios based on your risk tolerance.

Also read - Learn How To Save Tax With ULIPs

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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