Should You Buy ULIPs? Know Why ULIPs Are Right For You

Reasons to Invest in ULIP!

What if you could get an insurance-investment plan? Market-linked investment cum insurance. ULIPs are becoming increasingly popular among investors of all ages, from young professionals to retirees. ULIPs’ benefits keep them popular.

Unit-linked Insurance Plan offers life insurance and investment incentives. Like a mutual fund, the insurance company invests its premiums in debt and equity instruments. Thus, ULIP provides family financial security and market-linked wealth generation.

How do these plans’ investments work? Do ULIP owners choose investments? Yes! Your needs and risk tolerance determine your investment options.

ULIPs help investors build long-term wealth through market-linked financial products. ULIP investments can generate significant liquidity at maturity or during the policy term through partial corpus withdrawals. After investing in a ULIP, you cannot make these withdrawals. This is just one of the many reasons for ULIP benefits.

ULIPs Allow Withdrawals?

Lock-in periods prevent withdrawals from the building corpus. After this lock-in time, you can make partial corpus withdrawals. In 2010, the Insurance Regulatory and Development Authority of India increased the current ULIP lock-in period from three to five years. ULIPs have a 5-year lock-in period. However, they are long-term investment plans, avoiding frequent withdrawals to maximise gains.

ULIPs—mutual funds?

Many think ULIPs are mutual funds. First, ULIPs offer market-linked instruments and life insurance, while mutual funds are pure investment plans. Both are suitable investments. You must know your goals to invest. ULIPs provide family financial security, long-term wealth creation, asset allocation flexibility, and tax benefits. You can always check on the ULIP calculator to understand more about it.

Who Should Invest in ULIPs?

Indian investors like ULIPs. Investors such as:

Flexible investors

The plan lets you switch between funds with different risk-return characteristics. If you like budgeting, consider investing in a ULIP. Policyholders can inspect their assets, maintaining openness. The insurance provider can invest the collected corpus based on market performance for people who don’t wish to monitor their investments.

Long-term investors

Invest in ULIPs if you can wait for more significant returns. ULIPs are most rewarding over time. A long investment horizon allows compounding to boost your corpus and reduces short-term market concerns. Use the fund-switching option to ensure your ULIP assets are in the proper funds to enhance long-term returns.

Age-grouped investors

ULIPs are adaptable to each age group’s needs and preferences. So choose a policy based on your life stage. ULIP plans can help young professionals build long-term wealth and achieve many life goals. ULIPs can help you save for retirement or college if you’re in your 30s or 40s.

Variable-risk investors

Equity funds are suitable for high-risk investors since they can yield the most significant profits—debt or balanced funds suit low-risk investors.

Why ULIPs?

ULIPs offer:

1. They’re popular long-term financial tools

Long-term investment plans are ULIPs. ULIPs use compounding—reinvesting profits—to develop market-linked wealth and a large corpus.

Long-term investing reduces market volatility and boosts rewards. ULIPs are suitable for long-term goals like buying a home or seeing your child married.

2. They give a wide choice

Unit-linked insurance offers unlimited flexibility and choice. You can select the tenure, demise benefit amount, and investment amount and kind.

Young risk-takers should invest in equities funds. However, senior investors with low-risk tolerance can invest in debt or balanced funds.

3. They allow fund transfers.

Indian investors also like ULIPs since they can switch funds at any moment. Assume you bought the plan and invested in equity funds.

You can quickly switch to debt funds if your risk tolerance changes or the market underperforms after a few years. If the market is good, you can switch from debt to equity again to optimise gains.

4. Tax benefits

Under the old tax regime, conventional ULIPs in India offer tax benefits. Section 80C of the Income Tax Act of 1961 allows you to deduct up to Rs. 1.5 lakh in plan premiums from your income. Section 10(10D) of the 1961 Income Tax Act exempts plan maturity/demise benefits from taxation. Deductions and exemptions depend on completing Act conditions. However, under the new tax regime, capital gains on ULIP insurance issued on or after 1 February 2021 with annual premiums of Rs. 2.50 lakhs or higher are taxed.

5. They offer top-ups

Finally, the diversity and flexibility of unit-linked insurance policies in India are among its many benefits. If you have extra income or windfall gains, you can add a lump sum to your ULIP. This premium payment boosts the fund’s value, increasing its return potential.


Unit-Linked Insurance Plans offer many benefits to policyholders. You can customise the plan and add a comprehensive investment plan to your portfolio.

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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