Kotak Life

Buy a Life Insurance Plan in a few clicks


Now you can buy life insurance plan online.

Kotak e-Term Plan

Kotak e-Term Plan provides a high level of protection to your loved ones in your absence. Know more

Kotak Guaranteed Savings Plan

Kotak Guaranteed Savings Plan is a savings and protection plan that helps you achieve long-term financial goals and provides an insurance cover against any eventuality. Know more

Kotak E-Invest

Kotak e-Invest plan is a complete Unit-Linked Insurance Plan that can be customized as per your goals and needs. Know more

Kotak Health Shield

Kotak Health Shield Plan helps secure your finances in sudden medical expenses such as Cardiac, Liver, Neuro, and Cancer (all early and significant illness stages/conditions of cancer), along with offering protection for personal accidents - in case of accidental death or disability. Know more

Kotak Lifetime Income Plan

Kotak Lifetime Income Plan gives you the security of your income continuing throughout your life and in your absence throughout your spouse's lifetime! Know more

What are the Advantages and Disadvantages of ULIP?

What are the Advantages and Disadvantages of ULIP?
  • 28th Feb 2022 |
  • 2,035

advantages of ULIP, pros and cons of unit-linked insurance plan, disadvantages of ULIP

Unit Linked Insurance Plans (ULIPs) are insurance types that combine investing and insurance into one package. Policyholders must pay a premium monthly, semi-annually, or annually for a term of 5-15 years. The inclusion of long-term capital gains on equities and equity-related investments, tax-free at maturity, gives ULIPs a competitive advantage. In addition, it’s an exempt-exempt-exempt product. ULIP tax benefits allow investors to claim a tax deduction of up to ₹1.5 lakhs annually u/s 80C of the Income Tax Act, but only provided the premium does not exceed 10% of the total insured amount.

ULIPs are becoming more popular as an investment option. If you’re a first-time investor, ULIPs may be the best choice because they offer a lot of flexibility while still reducing your risks. However, before investing, it is only fair to understand the pros and cons of Unit-Linked Insurance Plans.

Advantages and Disadvantages of Unit-Linked Insurance Plan

Advantages of ULIPs

1. Long-Term Financial Investment

ULIPs are ideal for consumers who want to put money down for a long-term objective since short-term market volatility provides lower returns, but long-term market investments produce very attractive returns.

2. Tax-Free Income

Tax-free and tax-advantaged returns are available through ULIPs. The premiums paid for ULIPs are tax-deductible, and the death payments received are also tax-free. The assured payout or the fund’s value of investments is also available to the policyholder, and these returns are not taxed.

3. Withdrawals in Parts

After the lock-in period, policyholders can make partial withdrawals as long as they don’t exceed 20% of the policy’s fund value. Furthermore, these withdrawals are not subject to taxation.

4. High Profits

ULIPs can generate good returns depending on the fund in which one invests. For instance, if the fund invests heavily in the capital markets, it will benefit from rising stock prices.

5. Flexibility

Investors can swap between investment funds as their goals and needs change with ULIPs. They can profit from stock price fluctuations by rotating between equities, debt, and cash.

Disadvantages of ULIPs

1. Higher Initial Investment Costs

Due to expenses charged on the investor that go toward policy charges, ULIPs are more expensive in the first few years.

2. Market Volatility

Due to market fluctuations, investors should expect lower gains in the early years. So, if you’re aiming to make a short-term investment, ULIPs aren’t the best option.

3. Switches are Charged

Most insurers provide free switches up to a certain number of transactions, which are paid per transaction.

4. Term of Lock-In

ULIPs have a five-year lock-in term during which no withdrawals are allowed.

Unit-Linked Insurance Plans provide you with the best of both worlds: insurance and returns. If you have invested in a ULIP that holds a significant amount of money in shares, you are taking a risk. However, your fund could earn a higher return if capital markets perform well. On the other hand, if you are planning to make an investment in securities that provide a variety of rewards all in one place, ULIPs are ideal. However, because the functions of investments and insurance are so diverse, it is typically recommended that they be maintained separately.

With thoughtful investment planning, you can avoid the disadvantages of ULIPs and avail yourself of numerous benefits.

Kotak e-Term Plan


  • Nominal Cost
  • Multiple Plan Options
  • Flexible Payout Options
  • Critical Illness Rider
  • Tax Savings
  • Long term Coverage

Ref. No. KLI/22-23/E-BB/492


Browse our library of resources

- A Consumer Education Initiative series by Kotak Life

Similar Articles

What are incremental term insurance plans?

Different Types of Protection Plans

8 Things To Do After Buying Term Insurance

How To Calculate The Amount Of Term Life Insurance You Need?

Insuring Against Disability With Disability Insurance Rider

What Types of Deaths Are Covered in a Term Insurance Plan?

Buying A Term Insurance Plan? Take These Factors into Account

Insuring Protection Against Death With Death Insurance Rider

What Should You opt for - Limited or Premium Pay?

Why Married People Should Buy Term Insurance Under MWP Act?

Individual Life Insurance vs. Group Term Life Insurance

Understanding Term Insurance Riders

Should You Have Multiple Term Life Insurance Policies?

What Is the Correct Age to Buy Term Insurance?

Term Insurance Plans and Policies for Smokers

Term Insurance: Most Common Term Insurance Myths Explained | Kotak Life

Best Investment Plans for Children - Secure Your Child's Future

Do Beneficiaries Pay Taxes on Term Insurance?

Why Buying a Term Plan Is Smarter Than Traditional Life Insurance Products

What is a short term insurance policy?

Key Differences Between Term Insurance, ULIPs, And Health Insurance

Eligibility Criteria for Buying Term Insurance in India

Different Types of Premium in Term Insurance

Why Should You Buy Term Insurance in 2022?

What All Documents Required For Term Insurance In India?

4 Things To Expect From Your Term Insurance Plan in India

How to Identify Term Insurance According to Your Needs?

Ideal Features of a Suitable Term Plan - Act Now for a Stress-free Future

Is It Good To Buy A Term Insurance Plan In 2022?

Term Plans are Definitely Cheaper than You Think!

Online vs Offline Term Insurance: Which Is The Better Option To Buy

What Is a Passive Income? Why Should You Use It to Buy a Term Plan?

Term Insurance: What Happens When You Don’t Pay Your Premiums?

8 Factors to consider before choosing a Critical Illness Insurance

Do You Need Term Insurance Cover After Retirement?

What is the Right Term Period For Term Insurance Policy? Here's How You Should Choose!

8 Benefits of Term Insurance You Should Know

Should Youngsters, Working Couples Buy Term Insurance Plans?

Busting Myths and Facts About Term Insurance Policies

Do I Need to Give a Medical Test for Term Insurance in India?

Is There Any Tax Benefit on Term Insurance?

Why Surrendering Your Term Plan Policy In The Final Phase Maybe A Bad Idea?

What is Form 16, Form 16 part A, Form 16 part B, Information Required and FAQs

How Much Term Life Insurance Cover Do I Need in India?

Is term Insurance Needed for People With No Dependents?

Insuring yourself against Ill Health with a Critical Illness Rider

When is the Right Time to Buy Term Life Insurance Policy for Yourself?

Should You Buy a Term Plan After 40?

Term Insurance – Why You Must Include In Your Financial Planning?

Increasing Term Insurance and Riders

Is Term Life Insurance Plan an Investment or Expense?

Steps on How to Buy Term Insurance Online

How Much Term Insurance Do I Need

Can Senior Citizens Avail Term Insurance?

Which Term Insurance to Choose: Lump Sum or Staggered Pay-out Plan?

Top 3 Reasons Why You Should Buy A Term Plan Now

Why Should New Parents Buy Term Life Insurance?

Term Insurance with Critical Illness

Make Your Online Term Plan Your Family's Monthly Pay Cheque

Can Non-Resident Indians (NRIs) Buy Term Insurance In India?

9 Ways to Help Family Members in Financial Trouble

Term Plan with Spouse Cover

Term Insurance Age Limit – Term Plan for All Age Groups

Can I Get Term Insurance on Behalf of My Spouse?

Can I Buy Term Insurance for a COVID-19 Patient?

Is ₹1 Crore Term Insurance Good Enough Cover?

Are The Add-ons and Optional Features of Term Insurance Plans Actually Beneficial?

5 Reasons to Buy Term Insurance When You are in Your 30s

What Is a Renewable Term Insurance Policy?

Know How to Invest at Every Age for Larger Returns

What Are Insurance Riders and How to Choose Them in a Term Plan?

Can I Make Changes to My Term Insurance Policy Post Purchase?

Make Your Online Term Plan Your Familys Monthly Payout

Term Life Insurance Plan for Smokers vs Non-Smokers

How To Change The Nominee in Term Insurance?

10-Year Term Life Insurance Policy - Explained in Detail

Why Term Plan Should Be The First Step To Securing Your Future?

Why Term Insurance Is Important in times of COVID-19?

Insuring Against Accidents with an Accidental Death Insurance Rider

Protection for your family

Why does every working woman need life insurance?

Planning For Son or Daughter's Wedding

Term Insurance Calculator - Everythng You Need To Know

Is Group Term Life Insurance Provided By Employer Sufficient?

Buying A Term Insurance? Don't Ignore the Claims Settlement Ratio

Why should single women purchase term life insurance?

What is Critical Illness Policy

9 Most Frequently Asked Questions on Term Insurance

Comparing Term Plans – What Should You Look Out For

Tax Benefits of Term Insurance in India

Can I Extend the Tenure of My Term Insurance Plan?

How Does Term Life Insurance Work? Learn the Benefits

All About Term Insurance Inbuilt Coverage

Importance of Term Insurance at Every Stage of Your Life

Difference between Term Insurance and Life Insurance

Advantages of Buying Term Insurance in Your 50s

6 Types of Death not covered in Term Insurance Plan

Term Vs. Whole Life Insurance: Which One You Should Buy in India?

5 Term Insurance Benefits for Single Women

What Should Be The Duration Of Your Term Plan in India?

How to Buy 1 Crore Life Insurance Policy Without Medical Test

4 Reasons Why You Need Critical Illness Cover

Term Insurance: Smokers vs Non-Smokers

Is a Term Insurance Policy Portable?

What is Insurance Premium - A Detailed Guide

Cost of Term Insurance Likely to Increase Soon

Can A Housewife Buy a Term Insurance Plan - All You Need to Know

What Happens to Term Insurance Plan With No Beneficiary - Kotak Life

5 Things To Consider While Buying Term Insurance Plan

Why Term Insurance Is Better Than ULIP?

Why Buy Term Insurance Plan With a High Cover?

What Are the Best Term Insurance Plans for Planning Retirement?

Everything About Claim Settlement Ratio for Term Insurance

Why is it important to buy term insurance plan?

Which Death Type Does Your Term Plan Not Cover?

How to Compare Term Insurance Online

What is a Joint Term Insurance Plan? Key Benefits of Joint Term Plan

What are the Documents Required for Term Insurance Plan?

Why Should You Add a Rider to a Term Insurance Plan?

How to Surrender Term Life Insurance When you have No Liabilities

Key IRDAI Regulations That Changed Face Of Term Insurance Industry In 2020

Endowment Plans vs Term Plans: Understanding the difference

How To Choose the Right Sum Assured Under a Term Plan?

Is Life Insurance Investment Worthy Enough

Tips to Choose the Right Term Period for Term Insurance Plan

How Does A Term Life Insurance Work in India?

All you need to Know about Term Insurance Plans for Housewives

How to Ensure That Your Term Insurance Claims Are Never Rejected?

How Much Cover Should I Take In A Term Plan?

Does Your Term Insurance Plan Cover Death Due to COVID-19?

Term Insurance With Riders In India

Advantages & Disadvantages of Term Insurance in India

6 Reasons That Make Term Insurance a Must Buy

How Not To Get Your Term Insurance Claim Rejected

Why Buy Term Insurance Even at Rising Rates?

Why 1 Cr Term Plan Is Necessary For Family?

Ensure Protection Against Death, Disease & Disability With Life Insurance

Does Term Insurance Cover Accidental Death?

Choosing Riders for Insurance Plans

Reasons You Need Term Insurance Plan as a Self-Employed Person

Calculating Term Insurance Premium

While Buying Term Insurance Compare Features, Not Just Premiums

Why Premium Amount for Term Insurance is So Low?

How To Choose the Right Term Insurance Plan?

Planning For Children's Future

What is Term Insurance - A Complete Guide

What Happens if you Hide Facts in your Term Insurance?

Can You Increase Your Term Insurance Cover?

Why Should You Not Take A Term Plan Without Medical Test in India?

Insurance Policy for Housewife In India

Is it a Good Time to Buy Term Insurance During the COVID-19 Pandemic?

Gift Your Father A Term Insurance Plan This Father's Day

5 Benefits of Early Retirement Planning

Can Term Insurance Plans Be Purchased As A Gift?

टर्म इंश्योरेंस क्या है? टर्म इंश्योरेंस का मतलब

4 Methods to Calculate How Much Term Insurance You Need

Term Insurance Basics You Should Know