Are ULIPs Safe? Here’s What You Should Know

ULIP policies provide life insurance. It offers long-term investors security.

The regulator changed charge restrictions in 2010 and other things. Nearly 100 ULIP plans and 500 funds are available.

How Does ULIP Work?

A “ULIP Policy” is made up of two parts: investments and insurance. There are mortality charges because life insurance is a part of ULIP policies. The ULIP returns are also taken care of by the fund component. Daily announcements of the fund’s Net Asset Value (NAV) are made. The ULIP return calculator will help you understand better.

The returns you receive from ULIPs are the difference between the NAV at the time of issuance and the NAV in effect today. The returns on your ULIP, for instance, would be 10% if the NAV at the time of purchase was Rs. 100 and is now Rs. 110.

ULIP Policies Provide Secure Investment Opportunities with Long-Term Views. Since ULIP plans have a five-year lock-in period, it makes sense to keep track of your ULIPS for at least five years because it becomes more stable over time.

ULIP Policies Are Long-Term Investments

Since the ULIP plan has a five-year lock-in period, monitoring them over five years or more seems sensible as they achieve stability.

The market regulator recategorised mutual funds last year. The Insurance Regulatory Development Authority of India regulates ULIPS. Thus, industry analysts say this did not harm them (IRDAI).

The insurance regulator has capped expenses and yield reduction for investors regardless of investment size. Therefore, ULIP returns are unaffected. ULIP charges include:

  • Allocation fees
  • Manager fees
  • Fees
  • Demises fees

Before investing, it is advisable to evaluate your financial goals, corpus, and risk tolerance. The insurance provider will charge if the plan is withdrawn before the five-year lock-in term, so assessing your financial situation and ambitions makes sense.

ULIPS are safe for long-term investments. Because ULIPS are risky, you should evaluate your risk tolerance and financial portfolio.

You should also verify if your life insurance coverage is enough, since only a tiny amount of your premium goes toward it.

ULIP: Is It a Good Investment?

Take your time acquiring ULIPS for tax savings. ULIP investments should support long-term goals like higher education, marriage, etc. You need to invest in a programme that boosts your income and meets your investing goals. The rate of return, maturity, and lock-in must be chosen.

Most debt arrangements, including endowment plans, mature in 10–20 years. For example, PPF, NSC, and Sukanya Samriddhi Yojana are government-backed fixed-return programmes with lock-in periods of 5, 15, and 21 years, respectively. It is advisable to learn about ULIP tax benefits before selecting any plans.

Equity-oriented investment plans like ULIPs and ELSS outperform other vehicles in terms of returns. ULIPS’ life insurance for policyholders’ dependents increases security.

ULIPS: A Safe Long-Term Investment?

The ULIP plan offers five reliable investment features.

New investors

Investors are slowly switching to market-linked investment instruments and insurance policies. First-time investors could obtain a ULIP policy to combine investment and insurance with a shift in investment patterns.

Better Profits

Equity-based ULIPs can outperform traditional insurance products.

ULIP premiums go to several asset-class funds that have historically returned double-digits and saved taxes. Equity market performance determines maturity amount. Endowment plans also provide a lump sum after the policy term and protect capital, but they do not combat inflation.

Lock-in period

ULIPs are better than other investments since the maturity amount is tax-free. Tax-exempt FDs have a lock-in period. However, the returns are applied to your income and are taxable at your income tax bracket.

ULIPs’ five-year lock-in encourages investment discipline. As a long-term insurance arrangement, a single ULIP coverage can benefit you.

ULIPS lock-in begins with policy issuance. Monthly or annual ULIP premiums are available.


Investors like ULIPs because they can swap funds mid-term. Equity, growth, balanced, and income funds suit your goals and risk tolerance. Four free swaps each year are typical.

ULIPs don’t require tracking fund investments as shares do. Select a ULIP insurance, adjust the fund allocation, and keep it till maturity for long-term benefits.

Dual Benefits

ULIPs are great long-term investments with tax exemption. Under the old tax regime, premiums of up to Rs 1.5 lakh are eligible for tax exemption u/s 80C of the Income-Tax Act. This has changed to Rs 2.5 lakh under the new tax regime. Investors under 45 have historically received a minimum of 10 times the annual premium. Read up on the ULIP return calculator before you invest in one.

The New IRDAI standards have also made Unite Linked Investment Plans more investor friendly. Fund management, premium allocation, administration, and surrender charges have also decreased.

Winding up

As you can see, a ULIP policy helps you diversify funds to increase wealth and accomplish long-term financial goals. ULIPs are suitable for 5-year equity investments. Stay invested—ULIPS are safe investments. Remember to know what ULIP is and what other ULIP tax benefits you can opt for.

Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

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