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ULIP Premiums Explained

ULIP premium

ULIP Premiums Explained


May 28, 2020

By : Bajaj Allianz Life

ULIPs are investments that offer a two-fold advantage to investors. Firstly, there’s the ULIP insurance component, which is directed toward giving you a protective life cover to safeguard you from any contingencies in the future. And secondly, there is an investment component that helps your capital appreciate over time. With the advantages offered by the ULIP insurance component and the investment component, you can protect your future and the future of your family, while also simultaneously ensuring savings to meet your long-term financial goals.

To fuel these two components of a ULIP, you need to pay a premium to the insurer. The ULIP premium is then distributed towards the insurance and investment components. To help you understand more about how this works, let’s get to the basics.

What is ULIP premium?

ULIP premium is a charge levied by the insurer on the insured. Depending on the ULIP policy you purchase, and the insurance provider’s terms and conditions, your premium payment can be made in either of the following ways.

• Single premium payment

Here, you only pay your premium at the time of purchasing the ULIP. Since the single premium payment option requires that you pay a lump sum amount up front, the amount is generally on the higher side.

• Periodic premium payment

Here, you can pay your premium periodically, on a monthly, quarterly, half-yearly, or annual basis. The premium is comparatively lower here, since the cost is spread across the tenure of the ULIP.

How does the ULIP premium get utilized?

So, you’ve invested in a ULIP and paid the premium for the year. The premium invested offers the policy holder dual benefits of investing in either an equity fund or debt fund (or both), while ensuring a life insurance coverage as well so that their loved ones are secured.

What happens if you pass away before the policy matures?

In most cases, here’s how ULIPs work in case your demise occurs before the policy matures - Your nominee receives the sum assured or the fund value whichever is higher. What your nominee gets entirely depends on the plan you have opted for and the specified conditions mentioned within. Nominee can obtain the benefit either as a lump sum or in monthly instalments depending on the terms of the policy.

What happens if you survive the policy?

If you outlive the policy’s term, you enjoy the maturity benefits of the ULIP purchased. You can also avail tax benefits on maturity proceeds as per section 10(10D) of the Income Tax Act, 1961, subject to the provisions stated therein.

Why do you need to pay your ULIP premium till the end of your policy term?

Now that you know how your ULIP premium is allocated to provide you ULIP insurance and investment benefits, it’s time to take a quick look at why you need to pay your premium promptly, right up to the end of your policy term.

Typically, most policies have a grace period during which you can make any payments that may have skipped earlier. If you fail to pay up during this period, your ULIP is discontinued, taking away all the benefits that come with the policy. As a result, here’s what you stand to lose.

• You no longer have a financial safety net to secure the future of your family in case of your unexpected demise, since the life cover is no longer valid.

• You also cannot claim any deductions as per section 80C of the Income Tax Act, 1961 since you would not have paid any premiums for that year.

To avoid these unfavourable developments, it’s prudent to pay your premiums on time till the end of the policy term.


The genius of a ULIP is that it provides dual benefits. This way, you can check both investment and insurance off your financial to-do check list by simply investing in a ULIP. You can use a ULIP calculator before deciding on a plan to check how much premium you would require to accumulate your desired corpus to achieve your Life Goals, so you get a better idea of how your liabilities over the years will look like. Once you have an idea, you can plan accordingly to get your life goals done.

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~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.