Difference Between Unit-Linked Plans and Non Unit-Linked Plans

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Difference Between Unit-Linked Plans and Non Unit-Linked Plans

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  • 26th Apr 2022
  • 1,332

Difference Between Unit-Linked Plans and Non Unit-Linked Plans

The importance of a life insurance policy is now being taken seriously by almost everyone. This is because life has become uncertain today, and you never know what will happen next. The many incidents that happened in the past few years are making people realize the importance and necessity of insurance policies for themselves and their loved ones. Therefore, it is important to invest wisely in a comprehensive insurance policy to secure your and your loved one’s future. However, choosing the right one that fits your financial requirements can be overwhelming.

While talking about insurance policies, it is important to understand what is linked and non-linked insurance plans and how they are different from each other. Also, you must have clarity over linked and non-linked life insurance plans to easily pick the right option for securing your future.

This article will discuss what is linked and non-linked insurance plans. And we will also discuss the key differences between linked and non-linked life insurance plans.

What are Non Unit-Linked Insurance Plans?

Also known as traditional insurance plans, the non-unit-linked insurance plans aim solely on offering financial protection to the family in case of an unfortunate demise of the policyholder or severe illness during policy tenure and as per the policy terms and guidelines.

These insurance plans are not linked to the market, and the full amount of the premium goes towards insurance coverage; they are called non-ULIP policies. The insurance company itself manages the whole portfolio, and there is no policyholder participation. Thus, it is also known as a non-participating unit-linked insurance plan.

Insurance plans like term insurance, guaranteed savings plans, money-back policies, and other traditional insurance plans are categorized as non-unit-linked insurance plans.

What are Unit-Linked Insurance Plans?

Also known as modern insurance plans, Unit Linked Insurance Plan is a financial tool that gives you the benefit of both insurance and investment in a single policy. In these plans, the premium paid is divided into two parts. One part goes towards insurance cover, while the remaining part is invested in market funds of the policyholder’s choice. The investment part gives returns based on fund selection and market performance.

These plans are highly flexible, allow you to choose investment options based on your risk appetite, and facilitate fund switching features. Unit Linked Insurance Plans offer a decent return. However, since a part of it is linked with the market, volatility is certainly a risk factor that should be considered beforehand. Some ULIPs offer bonuses and loyalty rewards too. Although, this depends on the insurer and the policy’s terms and guidelines.

What is the Difference between Unit Linked and Non Unit-Linked Life Insurance Plans?




Investment flexibility

Highly flexible

Allows to manage investment

Gives freedom to choose investment funds of your choice as per policy

Enables to invest according to your risk appetite

Not Flexible

Insurance company manages everything related to investment

Maturity benefit

Calculate as per the Net Asset Value (NAV) at the time of maturity or policy surrender

Pre-defined total sum assured and promise of guaranteed return at the time of opting for the policy


All charges are upfront

Might have some hidden charges

Partial withdrawals

Allows partial withdrawal after lock-in period

Partial withdrawal is not allowed before maturity in most cases. There may be some exceptions

Switching options

Allows fund switching

Policyholder has no participation in investment

Having understood the difference, you can understand that ULIPs are a modern tool of investment that save you from the worries of managing multiple financial avenues at once and enjoy a flexible investment plan with multiple benefits.

- A Consumer Education Initiative series by Kotak Life

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