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Top ULIP Myths That You Must Stop Believing In

We are clearing 5 common misconceptions about ULIP (Unit Linked Insurance Plans) for better financial planning and securing your future.

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

The dual benefit of investment and insurance makes Unit Linked Insurance Plans (ULIPs) a popular choice in India.

But it is often the case that anything popular gets surrounded by myths and misconceptions. Especially in India, where financial awareness is a little low, it is not surprising to see people believing such misconceptions related to ULIP investments.

To help you make the right decision,

Here we are debunking top 5 common ULIP myths

Myth 1. ULIPs are Expensive

Until 2008, the premium allocation charges in ULIPs were high. But IRDA has now capped the fund management charges to 1.35% of the fund value, due to which ULIP investments have become highly cost-efficient.

Moreover, as insurance providers are governed by the IRDA, one can rest assured that the insurance provider will promptly inform about all the charges to ensure complete transparency.

Myth 2. ULIPs are Volatile

One of the USPs of ULIPs is their flexibility. It allows the investors to choose funds as per their risk profile. You can choose between equity, debt, and balanced funds as per your investment objective and risk appetite.

The belief that all ULIP investments are volatile is wrong as investors always have the option to choose a fund, they are most comfortable with.

Myth 3. ULIPs Generate Very High Returns within 3-5 Years

It is wrong to invest in ULIPs to generate very high returns within a short duration. While equity funds in the ULIP can deliver excellent returns, they also come with the highest level of risk.

The returns ultimately depend on the market conditions, especially if you’ve chosen an equity fund for your ULIP. Also, ULIPs are long-term products, and one should remain invested for 10-15 years for maximum returns.

Myth 4. Fund Switch is Expensive

With ULIPs, investors have the option to switch between various fund options offered by the insurer. Contrary to popular belief, switching between funds in ULIPs is not expensive. Most insurers offer 5-10 free switches without any charges.

Some of the ULIPs have no upper limit on fund switches. Even if you’ve used the limited free switches offered by the insurer, the cost of the switch is not more than Rs. 50 to Rs. 500.

Myth 5. Insurance Cover Depends on Market Conditions

The premiums that you pay towards ULIP are divided into two components- investment and insurance. Only the investment component fluctuates based on the market conditions if you’ve chosen an equity or balanced fund.

The insurance component is separate and has no relation with the market conditions. In case if the market falls, the life cover will remain the same.

Achieve Long-Term Financial Goals with ULIPs

The combination of insurance and investment makes ULIPs an ideal choice for achieving long-term financial objectives while also offering financial stability to the dependents in case of your demise.

Now that these common myths are busted, invest in ULIP with a reputed insurer and add more stability to your finances.

In this policy, the investment risk in the investment portfolio is borne by the policyholder.

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Ref. No. KLI/22-23/E-BB/521


- A Consumer Education Initiative series by Kotak Life