ULIP Features: What Makes Them Special?

Invest with Protection and Growth Potential

A Unit Linked Insurance Plan (ULIP) offers the dual benefit of life insurance protection and market-linked investment opportunities. While the primary purpose of a ULIP is to provide life cover, it also allows you to invest in funds that align with your risk profile—be it equity, debt, or a balanced mix.

ULIPs give you the opportunity to benefit from favourable market performance and long-term economic growth. Over time, as market conditions improve and the economy grows, the value of your fund may also grow—potentially enhancing your investment corpus. However, market movements, fund selection, and investment tenure also play a crucial role in overall returns.

What makes ULIPs stand out is the flexibility to switch between different fund types based on changing market conditions or your personal risk appetite. Whether you prefer the relatively stable returns of debt funds or the higher growth potential of equity funds, you can adjust your allocation accordingly.

And throughout this journey, your family remains protected with a life cover, ensuring financial security in case of an unforeseen event. With ULIPs, you don’t just invest—you invest with a purpose.

Take life’s uncertainties head-on

Another useful ULIP feature is how it supports your goals even when life is uncertain. The pandemic showed that anything can happen at any time. People lost jobs or had to deal with high hospital bills. In such situations, plan benefits from ULIPs can help provide financial safety and support.

ULIP plans give you life cover. So, if something happens to you, your family will get the sum assured. This gives peace of mind. But that’s not all. Some ULIPs also offer premium waiver benefits. If you pass away, the policy continues, and your family gets the benefits.

ULIPs also help in long-term planning. Suppose you want to buy a home, or send your child to college, or plan a wedding. ULIPs help you build a fund for such goals. You keep paying regularly, and the money grows over time.

Some plans allow you to add riders for health or critical illness, among others. So, if you fall sick, the plan may pay you a fixed amount to help you recover.

In short, ULIPs are not just for saving. They protect your life and also help you reach big goals, even when life takes unexpected turns.

Stay flexible

Flexibility is one of the most useful ULIP features. In life, situations change. So should your financial plan. ULIPs allow you to switch between funds. For example, if the stock market is not doing well, you can move your money to different funds.

And here is the good news. In some ULIPs, switching is free for a certain number of times. You can adjust your money flow based on what is happening in the market. You do not need to start a new plan.

This is very helpful if you are saving for big life goals. You can change the fund based on your risk level and the time left for your goal. Some plans also allow partial withdrawals after a few years. This is good if you suddenly need money for a big event or an emergency.

So, with ULIPs, you are not stuck. You can move and adjust, just like life does.

Think long term

ULIP features are best enjoyed when you think long term. These plans are made for people who want to build a good future. Whether it is for your retirement, your child’s future or buying your dream home, ULIPs can help.

When you buy a ULIP (Unit Linked Insurance Plan), it comes with a mandatory lock-in period of 5 years, but staying invested for 10 years or more is recommended to give your money enough time to grow and maximize benefits. ULIPs combine life insurance and market-linked investment, so if you die during the policy term, your nominee receives the life cover (death benefit). If you survive the term, you get the maturity value based on the fund’s performance.

Some ULIP plans also offer a feature where the mortality charges (cost of insurance) are refunded at maturity, though this benefit varies by plan.

Conclusion

ULIPs are smart tools for people who want both safety and growth. They offer life cover, flexible fund options, and long-term benefits. ULIP features make them a good option in a changing world. You can adjust your fund choices and feel safe with life cover. The more you understand these features, the better you can use ULIPs for your future. Make sure to check all charges, terms, and benefits in detail before you decide.

FAQs

What is the key benefit of ULIP plan?

The key benefit of a ULIP plan is that it gives you life insurance and helps your money grow in the same plan. One part of the plan keeps your family safe if something happens to you. The other part puts your money in market-linked funds that can grow over time. This way, your family is protected, and your savings grow for future needs like retirement or your child’s education. So, you get safety plus growth in one plan.

Is ULIP a good or bad plan?

A ULIP is a good plan for people who want safety and growth together. It is not just for savings; it also gives life insurance. This means your family will get financial support if something happens to you. ULIPs also let you choose how to grow your money—slow and steady or fast and bold. You can even move your money between different fund options. It is good for long-term goals if you use it the right way.

What are the 5 charges of ULIP?

There are five main charges in a ULIP plan. First, the premium allocation charge, which is a small cut from your payment. Second, the policy administration charge, which is used to manage your policy. Third, the fund management charge, which is taken to manage your money. Fourth is the mortality charge, which pays for life insurance. Last is the switching charge, which may apply if you move money between funds. Some plans allow free switches. These charges vary by plan.

Is ULIP tax-free after 5 years?

Yes, ULIP maturity proceeds are tax-exempt under Section 10(10D) of the Income Tax Act if the policyholder stays invested for at least 5 years (the mandatory lock-in period) under old tax regime.

• To qualify for this exemption, the annual premium must not exceed 10% of the sum assured for policies issued after April 1, 2012. For ULIPs issued on or after February 1, 2021, the annual premium should not exceed ₹2.5 lakh.
• If these conditions are met, the maturity amount and death benefit are tax-free.
• Additionally, premiums paid qualify for tax deduction under Section 80C, up to ₹1.5 lakh per year.