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Unit Linked Insurance Plans (ULIP)

The insurance sector in India has been evolving rapidly. Life insurance penetration has witnessed a surge, from just 2.71% in 2001 to 4.2% in FY2020-2021 [1]. In addition to the rise in life insurance penetration, the range of life insurance products offered by the industry has also grown over the years. Among the many kinds of life covers available in the Indian insurance market today, ULIPs or Unit Linked Insurance Plans are one of the products that also offer investment avenues. They offer several benefits to the policyholder, including life insurance, market-linked wealth creation and tax benefits.

Let’s take a closer look at what ULIP plans are and how they work.

What is a ULIP?

Wondering what is ULIP and why people invest in it? A ULIP or a Unit Linked Insurance Plan is a kind of life insurance plan that gives the policyholder the dual benefit of enjoying a life cover as well as investing in select market-linked funds. In other words, a ULIP plan is a combination of insurance and market-linked investment. Just like with a regular term insurance plan or a savings plan, you need to pay premiums to the insurance provider in order to enjoy the benefit of the life cover, where your premium gets invested in market-linked funds

A unique feature of ULIPs or Unit Linked Insurance Plans is that you can invest in a variety of funds such as equity funds, debt funds or even a mix of both. The value of each unit is called Net Asset Value or NAV.  Depending on how the value of the assets in these funds increase over the years, you can earn returns, subject to risk involved, on your initial investment and build market-linked wealth over the years. 

How does a ULIP Work?

A Unit Linked Insurance Plan has two primary components, namely the insurance component and the investment component. Let us see how each of these components work.


The insurance component of a Unit Linked Insurance Plan (ULIP)

Every Unit Linked Insurance Plan is, at its core, a life insurance plan. ULIP insurance offers a life cover to the insured person which is valid for the policy term chosen at the time of purchase. It ensures that the family of the insured person has some much-needed financial security in case the insured person passes away during the policy term. This is because upon the demise of the insured person, the insurance provider pays out the sum assured under the ULIP policy to the nominee mentioned in the policy. 


The investment component of a (ULIP)

You can choose what funds to invest in based on your risk profile. For instance, if you are young and open to taking on some level of market-linked investment risk, equity funds may be preferred. On the other hand, if you are extremely risk averse, ULIPs offer the option to invest in debt funds instead. For a more balanced portfolio, you can choose to invest in both equity funds as well as debt funds. 


How to buy a ULIP online?

With the integration of technology into the insurance sector, it is now possible to purchase a Unit Linked Insurance Plan right from the comfort of your home. Wondering how to buy a ULIP online? That’s very easy, thanks to the hassle-free process on our website.

Steps to buy ULIPs online
Check out the steps involved in purchasing your Unit Linked Insurance Plan from Bajaj Allianz Life online.


To buy a ULIP online, head to the Bajaj Allianz Life website at


Locate the ULIP section on the website and check out the different Unit Linked Insurance Plans available for purchase online. 


Select the ULIP policy of your choice from the list of different options available. 


Click on the ‘invest now’ option and proceed along your purchase journey.


Once this is done, you need to submit some essential personal details such as your name, your mobile number, your gender, date of birth, your email and your pin code.


In the next step, you need to fill out the relevant details of your policy and your investment, such as the policy term, the premium payment term, the amount of investment you wish to make, the investment strategy you prefer and the method of fund allocation based on your life goals and your investment preferences. 


After submitting these relevant details, you will be able to see the premium that you will be required to pay for your Unit Linked Insurance Plan and the benefits in form of a benefit illustration. 


If you wish to, you can modify any of the policy details you previously entered. The premium will change accordingly. 


Alternatively, you can retain the policy details, proceed with your purchase and make the first premium payment.


You will then have to fill and submit the proposal form. Thereafter, your Unit Linked Policy will be issued. 


ULIP Terminology - ULIP Terms You Should Be Familiar With


What is Sum assured?

The sum assured is the amount to be paid to the nominee by the insurer under the ULIP plan, in case the insured person passes away during the policy term.


What is Lock-in period?

The lock-in period in a Unit Linked Insurance Plan is the specified period during which the policyholder cannot exit the plan. For ULIPs, the lock-in period is 5 years.

What is ULIP Policy term?

The policy term in a ULIP is the period over which the life insurance coverage offered by the policy is valid.


What is ULIP premium?

ULIP premium is the amount charged by the insurance provider for the coverage and benefits offered by the policy. You can pay the premium as a lump sum amount in case of a single premium plan, or you can pay the premium periodically at regular intervals on a monthly, quarterly, semi-annual or annual basis as per the plan opted for.


What is Fund value?

The fund value of a Unit Linked Insurance Plan is the total market value of all the units in the ULIP funds you hold. It is simply the monetary worth of your investments at any given point in time.


What is Partial withdrawal?

The partial withdrawal facility is a ULIP feature which allows you withdraw a part of your investments during the policy term, after the lock-in period. There is generally a predetermined limit on the amount that you can withdraw depending on the terms and conditions of the product.


What is Premium redirection?

The premium redirection facility in a ULIP is a feature that you can use to determine how your future premiums will be allocated between your ULIP funds. You can choose to redirect your future premiums partially or wholly from one fund to another, based on market cycles.


What are ULIP charges?

ULIP charges are additional fees levied by the insurance provider for different expenses incurred over the course of the policy term.


What is Surrender value?

The surrender value is the amount that you will receive from your insurance provider if you decide to surrender the ULIP policy before maturity. It is paid out after the deduction of any charges that may be applicable.


What is Top-up premium?

The top-up premium is an additional amount that you can pay voluntarily over and above your regular premium, in order to increase the amount invested in your ULIP funds. 


What is Fund Switching?

Fund switching is a unique feature of Unit Linked Insurance Plans, which allows you to switch the funds in your portfolio as and when your financial goals change or as per the market movements. You generally get a specified number of free switches each year as per the features of the plan, after which your insurer may levy fund switching charges. In some ULIP plans, there may be no charges levied for fund switching.


What are ULIP Riders?

ULIP riders are add-ons that you can purchase at the time of buying your Unit Linked Insurance Plans. You need to pay a nominal additional charge for each rider you purchase. These riders offer additional benefits over and above what your ULIP policy offers. Some common examples of ULIP riders include the critical illness rider, the waiver of premium rider, and the accidental death and disability rider, among others.


What is Settlement option in ULIP?

The settlement option in a Unit Linked Insurance Plan allows the policyholder to customize how the maturity benefits are paid out by the insurer. With this option, the policyholder can choose to receive the maturity amount in the form of periodic instalments instead of a lump sum payout.


How to choose a ULIP plan?

When buying a ULIP, here are some factors that you should consider – .

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The plan vis-à-vis your goal

Firstly, you should choose a ULIP which aligns with your financial goals. Since different types of ULIPs are available in the market, you can find one which is suitable for your goals and then invest.
For instance, if building a corpus for your child’s higher education is your goal, a ULIP based child insurance plan may be suitable.

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The investment tenure

Once you select the ULIP, select the right tenure. The tenure should also match with your goal so that the ULIP gives the funds when you need them. Try and opt for a longer tenure so that you can give your investments time to grow and compounding to help in increasing the returns. 

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The investment funds

ULIPs offer a range of market-linked investment funds, each comes with its own risk-return profile. So, assess your risk appetite and then choose the suitable investment funds. If you don’t mind the volatility risks, you can invest in equity funds while for risk-averse individuals, debt funds can prove to be a suitable choice. 

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Past performance of the funds

Look at the past performance of the funds to know how well they are performing. Though past performance is no indicator of future returns, you can see if the returns are consistent and comparable with other funds in the same category.

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How flexible the plan is?

While ULIPs offer flexibility through switching, partial withdrawals, top-ups, premium redirections, etc. each plan might have terms & conditions associated with the flexible options. Check the flexibility of the plan by assessing the number of free switches, charges on partial withdrawals, availability of top-ups, etc.

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Additional returns available

Some ULIP might allow additional returns in the form of loyalty additions, fund boosters, wealth boosters, etc. These are over and above the market-linked returns that your fund earns. You may look for plans which offer these additional return for an enhanced return potential.

Who should invest in ULIPs?

ULIP plans cater to a wide variety of customers. To understand who should buy ULIP, one should focus on why I should invest in ULIP. Every individual has his/her own reasons to make an investment. The target audience for ULIPs can be categorized into four segments.

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People with varying risk appetite

Some ULIPs invest higher in equity funds while others invest higher in debt funds. Investors seeking relatively higher returns and are comfortable with a higher risk may invest in equity-oriented funds. On the other hand, risk-averse investors may opt for debt funds that offer more stability when compared to equity funds. Investors can also choose to distribute their savings across equity and debt funds as per their risk appetite. With a wide variety of funds, ULIP plans essentially cater to people with varying risk appetite. Before investing, one should look at the historical NAV of a fund to get an idea of what to expect in future and take a decision.

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People with a long-term investment horizon

ULIPs are structured to provide optimum returns for people having a long-term horizon. A ULIP plan offers a variety of equity and debt funds for investment to the policyholders. Market fluctuations can affect the value of the investment in the short term, but over a long period, equity and debt funds could deliver  returns on investment due to the power of compounding. Moreover, ULIP plans have a mandatory 5-year lock-in period. If the aim is to accumulate funds for long term life goals such as buying a dream house or saving up for your children’s education, then you can consider ULIPs as one of preferred options as it caters to the long term outlook.

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Hands-On Investors

Many individuals prefer to have an active role in their investments. Hands-on investors can use features like fund switching or premium redirection to modify their allocation and self-manage their investment as per their knowledge and expertise. Transparent data coupled with the option to modify allocations makes ULIP plans suitable for hands-on investors. ULIPs shows how much percentage in a fund is invested in a particular stock and it gives you a historic performance** of the particular fund in comparison to the benchmark returns.

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Investors Across Life Stages

Whatever your age is, you are sure to have certain life goals and dreams that you hope to fulfil. You may want to complete your MBA, or perhaps you want to make a down payment on your dream home. Whatever be the reason, to be able to fund your life goals you need a corpus. You can use an investment tool such as a Unit Linked Insurance Plan, or ULIP, to help you save up the money required to achieve your Life Goals.

Online Unit Linked Insurance Plans (ULIP)

Bajaj Allianz Life Invest Protect Goal

A Unit-linked Non-Participating Individual Life Savings Insurance Plan

Bajaj Allianz Life Smart Wealth Goal II

A Unit-linked Non-Participating Individual Life Savings Insurance Plan

Bajaj Allianz Life LongLife goal

A Unit-Linked Non-Participating Whole Life Insurance Plan

Bajaj Allianz Life Goal Assure II

A Unit- Linked Non-Participating Individual Life Savings Insurance Plan

Bajaj Allianz Future Gain II

A Unit-linked Non- Participating Individual Life Savings Insurance Plan

Bajaj Allianz Fortune Gain

A Unit-linked Non-participating Life Insurance Plan

A Unit-linked Non-Participating Individual Life Savings Insurance Plan

A Unit-linked Non-Participating Individual Life Savings Insurance Plan

A Non-Participating, Unit-Linked, Individual, Endowment Life Insurance Plan

A Unit-linked Non- Participating Individual Life Savings Insurance Plan

A Unit-linked Non-Participating Individual Life Savings Insurance Plan

A Unit-Linked Non-Participating Whole Life Insurance Plan

A Unit-linked Non-participating Life Insurance Plan

A new age ULIP with Return of life cover charges

A Guaranteed Maturity Unit-linked Insurance Plan

Types Of ULIP Plans

Types of ULIPs based on the plan structure

The plan structure can also vary from one Unit Linked Insurance Plan to another. Broadly speaking, there are two kinds of ULIPs based on this category.

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Single premium ULIPs

A single premium Unit Linked Insurance Plan is a kind of policy where you need to pay a single, one-time premium at the time of purchase. This premium is paid as a lump sum amount.

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Regular premium ULIPs

In a regular premium Unit Linked Insurance Plan, you need to pay the premiums periodically and regularly over the policy term. You can make your payments on a monthly, quarterly, semi-annual or annual basis as per the product features.

Types of ULIPs Categorized by Death Benefits

Death benefits are paid out to the nominee of the insured person in case of the latter’s demise during the policy term. Unit Linked Insurance Plans can also be classified into the following types based on the death benefits offered

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Higher of Sum Assured or Fund Value

Under this type of ULIP policy, the nominee receives the higher of the following two sums as the death benefits as per the terms & conditions of the policy:

  • The sum assured under the plan, or
  • The fund value
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Sum Assured + Fund Value

This kind of ULIP offers both the sum assured as well as the fund value to the nominee as the death benefit in case of the policyholder’s demise as per the terms & conditions of the policy. Because of this added benefit, Type 2 ULIPs come with a relatively higher ULIP charge.

Features of ULIPs

ULIPs share many features with other kinds of life insurance plans. That said, ULIPs also come with many distinct features that set them apart from other types of life covers.

Below are the main features of Unit Linked Insurance Plans and understand the impact they have on your finances:

ULIP Fund switching

ULIP Fund switching

The fund switching feature of a Unit Linked plan enables policyholders to move their money from one market-linked fund to another within the same plan to manage their returns. Policyholders can choose the funds as per their financial goals and risk tolerance capacity.

Partial withdrawals in ULIPs

Partial withdrawals in ULIPs

In traditional life insurance plans, you typically cannot withdraw any benefits until the end of the policy term. However, in the case of Unit Linked Insurance Plans, there is a partial withdrawal feature that helps you meet any liquidity needs even during the tenure of the policy. This feature comes into effect only after the lock-in period of five years, after which you can partially withdraw your investments as needed as per the policy terms & conditions.

Top-up investments

Top-up investments

The top-up feature in ULIPs helps you keep pace with your growing life goals by allowing you to increase the amount you invest in your policy each year. With the help of the top up feature, you can increase the investment in your ULIP. So, you get to invest more money in the market-linked funds of your choice. This may increase your chances of earning higher returns over the long term to meet your life goals. If you enjoy a sudden windfall, or earn a pay hike, you can take advantage of the top-up facility to upgrade your investments.

Premium redirection as per changing financial goals

Premium redirection as per changing financial goals

You can make use of the premium redirection feature in ULIPs to meet your changing financial goals. This feature essentially allows you to modify how your upcoming premiums should be allocated across your existing ULIP funds.

Benefits of ULIPs

Owing to their many unique features, Unit Linked Insurance Plans have several advantages. Check out the top benefits  of ULIPs that set them apart and make them essential for your portfolio. 

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Asset Allocation in ULIPs

Asset allocation refers to the strategy of allocating your capital across different ULIP funds offered under your policy. With ULIPs, you can choose to allocate your funds across equity funds, debt funds or a mix of the two as per your risk appetite and your financial goals.

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ULIP investment for wealth generation

Unit Linked Insurance Plans also give you the advantage of market-linked wealth generation over the long term. This is because they invest in market-linked assets, which could be susceptible to short-term market volatility, but generally tend to perform well over the long term. 

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Tax Benefits of ULIPs

In addition to the benefits outlined above, ULIPs also offer the advantage of tax savings in more ways than one. Check out the details of the tax benefits of Unit Linked Insurance Plans below.

Stage 1: Entry Benefits

When you purchase a ULIP, you need to pay premiums to your insurance provider. These premiums are deductible from your taxable income up to a limit of Rs.1.5 lakhs as per section 80C of the Income Tax Act, 1961 subject to provisions stated therein.

Stage 2: Earnings Benefits

If your investments grow over the policy tenure, they are not taxable as long as the funds remain invested. In other words, you do not have to pay tax on your earnings or gains if they have not been realized.

Stage 3: Exclusive Switching Benefits

ULIPs give you the option to switch the funds you invest in during the policy term. These switches are not taxable

Stage 4: Exit Advantage

In case of the policyholder’s demise during the policy term, the death benefits paid out by the insurer are tax-free in the hands of the recipient. Furthermore, if the policyholder survives the policy term, maturity benefits are paid out. For ULIPs issued before February 01, 2021, these maturity benefits are exempt from tax subject to satisfaction of conditions mentioned in Section 10(10D) of the Income Tax Act, 1961. However, for ULIPs issued on or after February 01, 2021, the LTCG will be tax-free up to Rs.1 lakh for given financial year for Equity Oriented ULIPs. More ever LTCG gains beyond the exempted limits will be taxable @ 10% for equity oriented ULIPs. For Debt Oriented ULIPs, capital gains tax would be applicable on the income from policy at applicable rates. Further, in case of multiple ULIP policies issued after 1 February 2021, held by a customer, he has the option to choose policies having annual premium less than Rs2.5 lakh in aggregate to be considered as tax free subject to the provisions of Section 10(10D) of the Income Tax Act, 1961. Only the incremental policy exceeding the annual premium amount of Rs2.5 lakh limit would be considered as taxable.

What is a ULIP Calculator?

A ULIP plan calculator is a simple online tool that uses data provided by the investor to give an idea of the expected returns. As ULIPs are long-term insurance cum investment plans, it is advisable to use a ULIP maturity amount calculator before committing to get an idea of the estimated returns. 

Fund Options under ULIP

ULIPs offer a variety of different market-linked funds for the policyholder to choose from. This makes them suitable for all kinds of investors, whether they are aggressive, moderate or conservative in their risk taking capacity Here is a closer look at the primary types of ULIP Funds that are typically offered by insurance providers.


Equity Funds

As the name indicates, equity funds in ULIPs invest primarily in the equity market. This involves investing in listed equity stocks. Depending on the kind of stocks they invest in, equity ULIP funds can further be categorized as small-cap, mid-cap, or large-cap funds. The primary objective of equity funds is capital appreciation, since the market-linked returns associated with equity stocks can prove to be on the higher side over the long term.

However, you also need to remember that equity funds typically carry a higher level of risk than other kinds of ULIP funds, as the returns are market-linked.


Debt Funds

Debt funds invest in the debt market, which includes a wide range of debt-based securities such as government securities, corporate bonds, and a wide range of other fixed income instruments. As you may have guessed, the possibility of earning a fixed income over the foreseeable future brings down the risk associated with the investment. This is why debt funds carry a lower level of risk.

So, if you are interested in getting the dual benefit of insurance and market-linked investment, but are unwilling to take on the high risk that equity funds possess, you can choose to invest in debt funds instead.


Liquid Funds

Also known as cash funds or money market funds, these ULIP funds invest in liquid assets such as money market instruments and short-term debt securities that have a high credit rating. Some of the common assets that cash funds invest in include cash and bank deposits, treasury bills and commercial papers. They are highly liquid and easy to redeem, making them ideally positioned to help you meet your short-term goals.

However, money market instruments and other assets that cash funds invest in typically offer lower returns than equity and long-term debt instruments. So, before you choose these ULIP funds, you need to ensure that they are aligned with your life goals.


Hybrid/Balanced Funds

Hybrid funds rely on a mixed asset allocation to distribute the risk more equitably among your ULIP portfolio. In this case, you can benefit from investments in both equity instruments and debt securities. This kind of asset allocation gives you the advantage of capital appreciation from the equity investments and the benefit of reliable earnings from the debt instruments.

The risk is also more moderate in the case of hybrid ULIP funds, since the high risk from the equity assets is diluted by the lower risk associated with the debt instruments. So, if you are unsure of whether equity or debt may be the right investment for you, you may get the best of both worlds by purchasing a ULIP and choosing a suitable fund.


ULIP Fund Performance - Why You Should Monitor Your Investment

It is not enough if you simply make your ULIP investment and sit back over the entire policy term. You also need to keep an eye on the performance of the ULIP funds and monitor if and how your capital is growing. Here is why this is an important exercise.

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You can keep an eye on the risks

When you invest in a Unit Linked Insurance Plan, you bear the entire risk associated with market-linked investments. Keeping an eye on how your ULIP funds are performing helps you check if the risks are within the limits that you can tolerate. 

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You can switch your funds if needed

ULIPs offer a fund switching feature that you can use to keep pace with changing market movements and your changing life goals. By monitoring the fund performance, you can better identify when a fund switch is necessary.

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You can meet your long-term goals

By checking the performance of your ULIP funds periodically, you can also assess if you are on track to meet the financial goals for which you made the investment in the first place. This way, you won’t fall behind on your life goals.

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Fund Performance Check

If you have invested in a Unit Linked Insurance Plan from Bajaj Allianz Life Insurance Company, you can check the performance of your ULIP funds** online right here.

Here's Why You Shouldn't Surrender Your ULIP

A Unit Linked Insurance Plan is primarily designed to be a long-term investment option. It comes with a lock-in period of 5 years. But ideally, continuing to remain invested even beyond the 5-year lock-in period can be financially beneficial to you.

If you are thinking of surrendering your ULIP plan, here are some reasons you may consider not doing it.

Market-linked returns of ULIPs are better over the long term

Market-linked returns of ULIPs are better over the long term

ULIP returns are market-linked. And market-linked returns may be affected by market volatility over the short term, but are typically better over the long term. This is one reason to remain invested throughout the policy term.

You lose the insurance benefits

You lose the insurance benefits

If you surrender your Unit Linked Insurance Plan, you not only lose the benefit of market-linked returns, but your insurance coverage also stops. This will leave your loved ones without a financial safety net in case of any uncertainties.

You lose the tax benefits too

You lose the tax benefits too

For ULIPs, premiums are tax-deductible up to Rs.1.5 lakhs under Section 80C of Income Tax Act, 1961 subject to provisions stated therein. These tax deductions under Section 80C will not be available to you if you surrender your policy within the lock-in period. Additionally, you may also lose out on the tax benefits that can be availed on the maturity amount under relevant sections of the Income Tax Act, 1961.

Two Main Reasons : Why you should invest in a ULIP Early On?

If you have just gotten your first job, or if you are in your 20s and contemplating buying a Unit Linked Insurance Plan, you’ll be glad to know that there are several benefits to investing in a ULIP early in life.

Here are the top reasons you should consider while investing in a ULIP when you are younger:

You can enjoy the benefits of power of compounding

You can enjoy the benefits of power of compounding

Compounding refers to the re-investment of income to generate additional income over time. The longer you stay invested, the higher will be your wealth accumulation.

You get a higher investment corpus

You get a higher investment corpus

When you buy a Unit Linked Insurance Plan early on, the mortality charge is lower. Thus, the amount you get to invest in funds, post deduction of applicable charges, is higher. Also, you get enough time to let the investment grow and reap maximum benefits out of it.

You can take on a higher level of risk

You can take on a higher level of risk

When you are younger, you have the luxury to invest in high risk ULIP funds, which also comes with the potential to generate higher returns over the long term. So, by buying your ULIP early on, you can choose to invest a sizable portion of your capital in equity ULIP funds and benefit from equity market-linked returns.

Why Choose Bajaj Allianz Life ULIP Plans?

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Bajaj Allianz Life is one of the leading private life insurance companies in India. The company is a partnership between two powerful and successful entities in their own right - Bajaj Finserv Ltd, one of India’s most diversified non-banking financial institutions and Allianz SE, one of the world’s leading asset managers and insurers.

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Claim Settlement Ratio

Before buying a ULIP plan, it is crucial to ensure that the insurance company will honor its promise in your absence. If your family’s claim is rejected, it will defeat the purpose of buying a ULIP insurance plan. The claim settlement ratio is a critical metric that throws light on the insurance company’s claim settlement record. It is the ratio of the number of claims accepted by the insurer versus the total number of claims filed in a year. Bajaj Allianz Life has a stellar claim settlement ratio of 99.04% for FY 2022-23[4].

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Multiple Options

Bajaj Allianz Life offers a host of ULIP plans catering to a wide variety of customers. You can choose from different ULIP plans according to your financial objectives and plan to achieve your Life Goals.

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Extensive Distribution Channel

Bajaj Allianz Life has set up an extensive network of branch offices and agents. The company serves millions of customers through 512 branches[4]. Along with the physical network, you can also buy Bajaj Allianz Life ULIP plans online from the comfort of your home by logging on to

Factors Affect

Myths about ULIP plans

Here are some common myths and the reality about ULIPs –

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Myth 1 – ULIPs are risky

Many believe that since ULIPs invest in the  market-linked funds, they are risky as the returns are not guaranteed.

Reality – While the returns are not guaranteed, the risks depend on your investment strategy. ULIPs offer different types of market-linked funds and if you want to avoid risks, you can invest in funds like debt funds for stable returns. Moreover, there is the option of switching and premium redirection, (can be opted subject to policy terms & conditions), which allows you to change your funds when the market conditions change to minimize risks. 

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Myth 2 – ULIPs have high charges

ULIPs have a list of charges associated with them making policyholders believe that they have high charges.

Reality – While it is true that there are different charges associated with ULIPs, the charges are capped. Some ULIPs have no allocation charge reducing the charge structure considerably. Moreover, some ULIPs may also offer the return of mortality charges or other charges on mortality.

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Myth 3 – Investment returns are not good

People believe that the investment returns from ULIPs are not good and so people avoid investing in such plans.

Reality – ULIPs invest in different market-linked funds and the investment returns depend on the funds that you choose. Equity funds  have the potential to generate returns if you stay invested over the long term wherein the volatility might smoothen out. The returns are in tandem with market movements. So, if the market is rising, the returns might be good. Moreover, debt funds may offer lower returns as compared to equity funds and the risk associated is low too.

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Myth 4 – High premiums are needed for ULIPs

People believe that they need to pay a high amount of premium to invest in ULIPs.

Reality – ULIPs do not require high premiums. There are plans where the premium starts from as low as Rs.12,000 per year or Rs.1000 monthly, depending on various other parameters like age, income, medical condition of proposer etc.. However, this would differ from insurer to insurer. So, you can invest in ULIPs with premiums that suit your pocket.

How to Manage Money with ULIP?

HULIPs allow various flexible features to help you manage your money. Have a look –

Choice of investment funds

Choice of investment funds

Firstly, there are a lot of market-linked investment funds available with ULIPs. You can choose from a choice of equity funds, debt funds, liquid funds or hybrid funds suiting your needs. So, you can choose one or more funds, depending on your risk appetite and investment needs and invest your premium.



Switching means changing investment funds. This allows you to manage your investment as the market dynamics change. If the equity market falls, you may switch your equity investment to debt funds to protect your returns. On the other hand, in rising markets you can switch from debt funds to equity funds to bank on the potential returns. Switching is also tax-free making it easy for you to manage your money. Switching can be opted for, as per the terms & conditions of a ULIP policy.

Partial withdrawals

Partial withdrawals

Partial withdrawals allow liquidity after a lock-in period of 5 years. So, if you need money, you can draw upon your existing investment, subject to the policy’s terms & conditions.

Premium redirection

Premium redirection

Premium redirection means redirecting subsequent premiums to another investment fund of choice, as per policy’s terms & conditions. This also helps you manage the market risks by changing the fund choices.



Top-ups mean additional premiums. If you want to increase your investment under an existing ULIP for enhancing the return potential, you can choose top-ups and pay additional premium. 

Settlement Option

Settlement Option

Some ULIPs offer the settlement option on maturity wherein the maturity benefit can be withdrawn in installments over a period of five years after maturity. This allows you to remain invested in the plan to earn returns over the next 5 years after maturity.

Claiming Tax Benefits on ULIP

ULIPs offer different types of tax benefits, listed below5:

· Premiums invested in ULIPs qualify for a deduction under Section 80C of the Income Tax Act, 1961, up to a limit of Rs.1.5 lakhs, subject to provisions stated therein.

·  Death benefit earned from a ULIP is tax-free

·  Switching is tax-free

·  Partial withdrawals made from the plan are tax-free subject to satisfaction of conditions as mentioned under Section 10(10D) of the Act

·  On maturity, the benefit received from the ULIP is tax-free under Section 10(10D) of the Income Tax Act, 1961, without any restrictions. However, this exemption is available on policies issued before 1st February 2021. For ULIPs bought on or after 1 Feb 2021, the tax exemption is available only if the aggregate annual premium under all ULIPs is up to Rs.2.5 lakhs. If the annual premium exceeds Rs.2.5 lakhs, the returns earned from ULIPs would be taxed in your hands. The taxation of such returns would be as follows –

  • Long-term capital gains from equity funds held for more than 12 months would be tax-free up to Rs.1 lakh. If the gains exceed Rs.1 lakh, 10% tax would be charged on the excess return.
  •  Long-term capital gains from debt funds held for 36 months or more would be taxed at 20% without the benefit of indexation.


Frequently Asked Questions

  • When should you invest in ULIP?

    While you can invest in ULIP at any stage of your life, it is preferred to invest as early as possible. Investing now will have an impact on ULIP returns over a long term. The earlier you invest in ULIP, the greater are the advantages like:

    • You can benefit from the Power of Compounding, if you decide to continue to stay invested for longer time
    • A long investment horizon ensures a Higher Corpus
    • Higher Potential of Risk Appetite
    • Systematic Savings
  • What Should You Keep in Mind While Investing in ULIP?

    Before you go ahead with your investment in a ULIP, there are 5 key things that you should always keep in mind.

    • ULIP investments involve a host of different ULIP fees and charges.
    • The solvency ratio and claim-settlement ratio of the insurer is very important.
    • Opt for funds based on your risk appetite and goals.
    • Compare multiple ULIPs and choose the one that fits your needs and requirements.
    • ULIPs are suitable for the long-term, so it is advantageous to remain invested over the whole policy tenure.
  • What is AUM?

    AUM stands for Assets Under Management. It is the total market value of the pooled corpus which is being managed by the insurance company on behalf of the policyholders. For instance, if 1000 investors each invest Rs. 1000 in a fund, the total pooled corpus is Rs. 10,00,000. If the market value of the corpus increases to Rs.12,00,000, the AUM would be Rs. 12 lakhs.

  • How to minimize risk with ULIP?

    ULIPs offer debt funds which have a low risk profile. So, if you are risk averse, you can invest in debt funds for minimizing the volatility risks. Alternatively, if you invest in equity funds and the equity market starts falling, you can switch to debt funds to protect your returns. Then, when the equity market rises again, you can switch back to the equity funds. 

    You can also redirect your premium to debt funds in falling markets to minimize risks

  • How are units allotted in ULIP?

    The units are allotted based on the Net Asset Value (NAV) of the fund that you choose. First, the allocation charges would be deducted from the premium and the remaining premium would be divided by the NAV to allocate the relevant number of units.

  • How can I track my ULIP fund value?

    You can visit the insurance company and check the performance** of the selected funds to track your ULIP fund value. You can also check your policy fund value on the Insurer’s website and see how your investment is performing.

  • Is GST applicable on ULIPs?

    GST is applicable on the premium paid for the ULIP plan. However, GST is applied on the different charges levied under the ULIP plan, i.e., premium allocation chare, fund management charge, mortality charge, etc. GST is applicable at 18%.

  • Are ULIPs Safe?

    ULIPs are a long term investment and have the potential to yield considerable returns when you stay invested for long-term. It is important to choose the market-linked funds you want to invest in wisely, basis your risk appetite, age and financial portfolio in order to mitigate the risks involved. However, since ULIPs are market linked, the returns depend on the market movements and fluctuations.

  • What is the maximum duration of the free look period of a ULIP?

    The free look period of a Unit Linked Insurance Plan is typically 15 days from the date of receiving the policy document. In the case of electronic or online ULIPs, the free look period is 30 days. If you are not satisfied with the policy, you can cancel it during this period without paying any additional discontinuance charges. However, the mortality charges deducted, expenses incurred on medical examination and stamp duty charges will not be refunded.

  • What is a regular premium policy?

    In a regular premium policy, the policyholder is required to pay premiums regularly at the chosen intervals. At the time of purchase, policyholders may choose to make premium payments on a monthly, quarterly, semi-annual, or annual basis. The premium payment term is the same as the policy term in regular premium ULIPs.

  • What is the suitable way to choose a ULIP?

    Choosing a ULIP plan that fits your needs and requirements perfectly is crucial to be able to satisfy your goals. Here’s how you can make sure that you choose a ULIP plan that’s suitable  for you. 

    • Always compare multiple ULIPs to see which one fits your goals better
    • Select a ULIP that levies low fees and charges
    • Choose a ULIP fund option that’s appropriate for your risk appetite
    • Opt for the right amount of insurance coverage

    Trigger-based portfolio strategy helps you in ‘Securing your Gains’ and maintain your exposure between debt and equity. This strategy is available with some Bajaj Allianz Life insurance products where your portfolio consists of an initial allocation of 75% to equity and 25% to debt. At specific trigger point(s) the allocation is checked and automatically adjusted to the initial allocation. 

    What is a trigger-based portfolio strategy in a ULIP?
  • What is the wheel of life portfolio strategy in a ULIP?

    Wheel of life ensures that a balance is maintained between your ‘years to maturity’ and level of risk on your investments, in a nutshell higher the age lower is the risk exposure. This strategy is available with some Bajaj Allianz Life insurance products, to align your investment risk across the various stages of your life, initially, when you can tolerate higher risk versus later years where you want to safeguard your investment returns

  • What is the death benefit payable under a ULIP policy?

    A ULIP policy is essentially a life cover. So, if the insured person passes away during the policy term, the insurance provider pays out the death benefits as per the terms and conditions of the plan, to the nominee mentioned in the policy. 

  • What is the maximum amount of partial withdrawal in ULIPs?

    The exact limit on the maximum amount of partial withdrawals in a Unit Linked Insurance Plan varies from one insurer to another, as well as from one policy to another. So, it is essential to read the terms and conditions of your policy before you make your purchase, to understand the limits on the partial withdrawal better. 

  • When is the right time to switch your ULIP fund?

    There is no specific right time to make fund switches in your ULIPs. Typically, a switch in your ULIP funds may be necessary in the following cases. 

    • If the market moves significantly in either direction
    • If you have achieved an existing life goal
    • If you have a new life goal you need to invest for
    • If the policy maturity is approaching
  • When will I receive a fund booster?

    A fund booster is a ULIP benefit offered under some of the Bajaj Allianz Life insurance products that enhances the amount you receive at the time of maturity. This is an incentive for paying your premiums regularly throughout the policy term and stay invested till the end of the policy. If your ULIP offers this feature, and if you qualify for it, you will receive the fund booster on maturity, subject to the conditions mentioned therein under the plan. 

  • Can ULIPs give high returns?

    ULIPs have the potential to generate returns based on the performance of the market-linked securities they invest in, market conditions and many other factors. To truly enjoy the benefit of these plans, it is advisable to remain invested over the long term, or over the entire tenure of the policy.

  • Can I get my premiums back if I am dissatisfied with a ULIP policy?

    That depends on when you surrender or cancel your policy. If you do so within the free look period, your insurer will typically refund the premium after deducting any charges they may have incurred, for medical test, mortality charges and stamp duty charges. On the other hand, if you surrender your policy after the free look period, you will receive the surrender value of the policy, if any. This is calculated as the total premiums paid multiplied by the surrender value factor, net of surrender charges and any other deductions, if any. There is no surrender charge after the 5th policy year.

  • Can I invest more than the regular premium for ULIP?

    If you wish to invest more than the regular premium in your ULIP, you can make use of the top-up feature in your policy. As per this feature, you can invest a top-up premium in your policy, over and above the regular premium. This comes in handy if you have received a bonus or a windfall and want to use the funds for investment purposes, or if you want to take advantage of market movements and increase your investment in a particular ULIP fund.

  • Can I make a partial withdrawal from my ULIP?

    Yes, you can. Unit Linked Insurance Plans come with many beneficial features. One of these ULIP benefits is the partial withdrawal feature. You can use this feature to withdraw a portion of your investments after the lock-in period of 5 years. This feature can be availed subject to policy terms & conditions. When the question of ‘Can we withdraw from ULIP?’ arises, it is worth considering if the withdrawal is indeed urgent or necessary.

  • Can NRIs Buy ULIPs in India?

    Yes, Non-Resident Indians (NRIs) can buy Unit Linked Insurance Plans in India.

  • What happens if payment of ULIP premiums is discontinued?

    If you stop paying the premiums after expiry of the lock-in period, you can convert the policy to paid-up and withdraw the funds that remain in the ULIP. However, if you stop paying the premiums within the lock-in period of a ULIP, your policy will automatically be labelled as a discontinued policy and you will cease to receive all benefits under the plan. You can either revive the policy by paying the missed premium(s) or surrender it. If you surrender the policy before the expiry of the lock-in period, the insurance cover will cease to exist and, you will be allowed to withdraw your funds after deduction of appropriate charges, only after the lock-in period ends.

  • What is the meaning of absolute return of a ULIP Fund?

    The returns that your ULIP fund investments generate over a specified period of time is termed as absolute returns. It is the difference between the initial value of the investment, and the final value of that investment, over a particular time. Absolute returns are calculated on the Net Asset Value (NAV) of a ULIP. 

  • What Is the Auto Transfer Portfolio Strategy in A ULIP?

    According to the auto transfer portfolio strategy, offered by some Bajaj Allianz Life insurance products, the initial premium payments that you make will be invested in low-risk funds such as bond funds or liquid funds. And at the start of every month, a portion of your fund value will be switched over to other high risk funds chosen by you automatically. This gives you the chance to earn an enhanced return on your investment by taking on moderate levels of risk.

  • What is the meaning of fund value in ULIPs?

    When you make ULIP premium payments, the same are used to purchase units of market-linked funds chosen by you at the time of purchase. The fund value is the total value of all of the units of funds that you own multiplied by the Net Asset Value (NAV) of the fund.

  • What is Investor Selectable Portfolio Strategy in A ULIP?

    The investor selectable portfolio strategy under some Bajaj Allianz Life insurance plans, allows you to choose the kind of ULIP funds that you wish to invest in. It allows you to switch your allocations between funds as well. As per this strategy, you can even choose to invest in one fund or in multiple different funds in a proportion of your choice.

  • How is the threshold of Rs.2.5 lakhs for ULIP to be determined?

    The annual premium threshold of Rs.2.5 lakhs should be inclusive of all premiums for ULIPs including top up premium, add on premium, etc. purchased after 1 Feb 2021.

  • Whether ULIPs with annual premium less than Rs.2,50,000 will be exempt?

    Yes, subject to satisfaction of other conditions in section 10(10D) of the Income Tax Act 1961, including the condition of sum assured being at least 10 times the annualized premium.

  • Whether TDS under section 194DA/195 continues to be triggered for high value ULIPs?

    Yes, since ULIPs have been defined as life insurance policy, maturity proceeds for high value ULIPs will be subject to TDS @ 5% on net basis for payments to residents under section 194DA and at applicable rates for payments to non-residents under section 195.

  • Whether single premium policies having premium in excess of Rs2,50,000 will be taxable?

    Yes, since the premium payable in year 1 of the policy exceeds Rs2,50,000, the policy shall not qualify for exemption under section 10(10D) of Income Tax Act 1961.