Unit Linked Insurance Plans


Unit-linked Insurance Plans or ULIPs are marked linked plans which dynamically offer insurance and investment. Its insurance with dynamic investment option as it is linked with market funds also gives option between choosing from equity, debt, balanced funds based on one’s risk appetite. Be it Wealth creation, planning for children education/marriage or securing your post retirement years, ULIP variants are available.

ULIP has traveled long way since its first launched in 2005 at India. When it started charges where little on higher side, however second generation ULIPs are much cheaper charges are as low as 1.35%* in few available ULIPs in market. IRDA in 2010 has also capped the aggregate charges at 2.25%. Few ULIPs are cheaper than mutual funds and they come with life cover too. In the recent news few insurance companies have launched ULIPs with life cover with no mortality charge that is life cover is given to insured without any charges.

Functioning for ULIP

Premiums paid are invested in equity, debt, balanced funds chosen by you. Charges are applied for allocation, fund management, mortality etc. Value of each fund is calculated units called as NAVs – net asset value.
The net asset value (NAV) of a unit-linked insurance plan (ULIP) is the total value of its holdings net of admissible expenses. NAV is the value of each unit of the fund on a given day. The NAV of each fund is displayed on the insurer website. You may also view the same under your ULIP account given to you by insurer.

Types of ULIPs
Type 1

At death insured receives death benefit which is equal to higher of sum assured or fund value.

Type 2

At death insured receives death benefit which is equal to higher than sum assured and fund value. Premium is higher in type 2 ULIP than type 1 ULIP.

Tax benefits of investing in ULIPs


Under section 80C, you can claim deductions equivalent to the premium amount paid on Safebima ULIPs as life insurance or under 80CCC as pension up to a permissible limit. This limit is currently set at Rs 1.5 Lakh. You can avail this deduction on the premium amount up to 10 % of the sum assured with a ceiling of Rs.1.5 Lakh. You can also claim all the charges collected by the insurer such as service charge as a deduction.

Moreover, the amount you receive as partial withdrawal / at maturity of the ULIPs is tax-free under section 10(10D) of the Income Tax Act, 1961. The death benefit payout upon death of the policyholder is also exempt from tax.

Types of charges in ULIPs


Premium allocation charge

Policy administration charge

Surrender charges

Mortality charges

Fund management charges

Fund discontinuation charge

Fund switching charge

Premium charge

Varieties of ULIPs

Retirement Plan

Invest in a ULIP retirement plan to prepare yourself for a secured life post-retirement. Under this plan, an individual pays the premium during the tenure of his/her employment.

This premium is divided into two parts – one part goes towards your life insurance cover and the other part is invested in an instrument of your choice. This small amount that you periodically invest builds a corpus which you can use after retirement.

Child Plan

With a ULIP child plan, you take a step towards securing your child’s future. Whether it’s your child’s education, marriage or any other important event, this plan helps you to stay financially secure. A child ULIP plan also offers life insurance cover for your child. This way, you can protect your child against any unforeseen situations and ensure they realize all their dreams.

Investment Plan

Your earnings today might not be adequate tomorrow. Moreover, high inflation rates and constantly rising prices of commodities can eat away your savings. Therefore, it is necessary to invest today to secure your future! A ULIP investment plan can help you achieve your goals of long-term wealth creation and security for your family. What’s more? Your investment in ULIPs, as well as returns on maturity, are completely tax-free!

How do ULIPs function?

  1. Decide the amount of premium to be paid and the amount of life cover you require.
  2. Some portion of the premium is deducted by the insurer upfront as premium allocation charges.
  3. The rest of the premium amount is invested in the funds chosen by the insured.
  4. Other charges such as admin and mortality charges are deducted on periodic intervals (mostly monthly).
  5. Fund management charges are deducted on a daily basis.
  6. At maturity, you will receive the fund value as at the time of maturity.

How to Choose our best ULIP plan

  1. Understand your requirement.
  2. Know your risk appetite (For e.g. If you’ve a high risk appetite, choose for a fund which is more aggressive and invests higher percentage in equities).
  3. Understand the charges levied on your plan as charges varied from product to product.
  4. Compare the past performance of your chosen plan, ensure that you’ve an easy access to your NAV whenever needed.
  5. Compare the products of different insurance companies to have maximum benefit out of your investments.

Things to keep in mind while opting for a ULIPs

Life Cover

Choose an appropriate life cover wisely keeping your needs and liabilities in mind, your sum assured should be sufficient to take care of all your liabilities in longer term.

Charges Higher

It provides you with desirable results only when bought for longer durations as the product charges are higher in the first few years.

Educate Yourself

Never forget to educate yourself about the charges incurred in ULIPs,Choose your fund options carefully keeping your risk appetite in mind.Check for the switching option carefully knowing the number of free switches etc. throughout the policy term.

Disclaimer !

Please note that the information provided is collected from insurers online sources and other publicly available resources & which we believe to be reliable. doesn't warrant the accuracy, reliability & absoluteness of information provided on the website. Participation by site visitors or registered customers is on a voluntary basis. The policies are offered by various life Insurance & non-life insurance offering companies and does not seek to, either directly or indirectly, advise, offer, solicit or recommend that any person who is or proposes to become its member should purchase the Policy.

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