Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak Guaranteed Fortune Builder

A plan that offers guaranteed income for your future goals. Know more

Kotak e-Term

Protect your family's financial future. Know more

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family. Know more

Kotak Guaranteed Savings Plan

A plan that offers long term savings and life cover. Know more

Kotak e-Invest

Insurance and Investment in one plan. Know more

Kotak Lifetime Income Plan

Retirement years are the golden years of life. Know more


Get a Call

Enter your contact details below and we will get in touch with you at the earliest.

  • Select your Query

Thank you

Our representative will get in touch with you at the earliest.

What are the Advantages and Disadvantages of ULIP?

ULIPs are becoming more popular as an investment option. Read blog and know the advantages and disadvantages of ULIP.

  • Feb 28, 2022

Advantages of unit-linked insurance plan and 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 5-15 years. Including 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. ULIPs may be the best choice if you’re a first-time investor because they offer a lot of flexibility while reducing your risks. However, it is only fair to understand the pros and cons of Unit-Linked Insurance Plans before investing.

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. Still, 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. In addition, the secure 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 if 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.

6. Product Brochures and key feature documents

While benefit illustrations are very helpful in understanding the quantifiable parts of ULIPs, it’s also critical that you comprehend all of the other characteristics and advantages that ULIPs have to offer.

To learn more about the specific benefits of your policy, see the product booklet. You will receive a key feature paper outlining the major aspects of the plan as soon as your policy is issued. This, along with the product literature, guarantees that you fully comprehend the plan that you have bought.

7. ULIPs Encourage Goal-Based Savings

You must save money if you want to achieve your major life objectives, like as purchasing a home, paying for your children’s higher education, or guaranteeing a happy retirement. One of the most convenient methods to achieve this is through ULIPs or long-term systematic investment options.

ULIPs support disciplined investing because they are made to help you achieve important financial objectives. Without such a strategy, you run the risk of sacrificing your long-term objectives to meet immediate requirements.

Disadvantages of ULIPs

1. Costs

ULIPs typically have a high cost attached to them. These fees are initially higher because they cover the costs of managing your funds and administering policies. As time goes on, both your costs and your potential profits rise. But it necessitates patience. A sizeable portion of your premium is first lost to charges.

2. Market realities

The fact that the market is unstable and you are still getting used to it is another factor that contributes to your initial years’ lower earnings from your unit-linked insurance plan. When necessary, you might or might not take chances, preferring to play it safe and missing out on potential opportunities for gains.

3. Switching charges

Most insurers will provide you with free fund transfers up to a specific amount. After this point, switching is, however, fee-based, and you must truly balance your prospective earnings against the fees incurred.

4. Complexity

A single ULIP may be difficult for novice investors to understand because it serves as both a life insurance policy and an investment. Whether it be for saving, investing, or insurance, we are accustomed to one instrument having a specific function and concentration. Additionally, the sheer magnitude of the charges might intimidate you. To get the most out of your ULIP, you must constantly decide where to move, redirect, and invest your funds in order to keep track of your fund NAVs and stay up to current on your insurance premiums.

5. Lock-in period

Before the 5-year lock-in period, you cannot withdraw your money from ULIPs. Even if you cancel your ULIP within five years, you would still need to wait until the lock-in period was ended to receive your money.

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 invest 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. Always remember to go through both the advantages and disadvantages of ULIP before making a decision.

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

Kotak e-Invest

Download Brochure


  • Return of Mortality Charges*$
  • Enhanced Protection
  • Multiple Plan Options
  • Zero Premium Allocation Charges
  • Tax Savings^

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


- A Consumer Education Initiative series by Kotak Life

Similar Articles

Can I Surrender My ULIP Policy after 2 Years?

Is Life Insurance Investment Worthy Enough

Customising investments to manage your wealth

What Is a Credit Score? Definition, Factors, and Ways to Raise It

How Is ULIP Different from Other Life Insurance Plans? Where Can I Invest - ELSS, ULIP, or PPF?

Best Investment Options in India in 2022

What are the Best Investment Options For Females?

How and when should you exit from bad-performing ULIP?

Early Investing and the Power of Compounding

How to Choose the Best ULIP Plans to Invest in 2022?

Building wealth through regular investing

Asset Allocations in ULIP - Know the Top Benefits

Benefits of ULIP as a Child Insurance Plan

Difference Between Passive and Active Investing

Why Should You Build an Emergency Fund?

How Do One-Time Investment Plans Work?

Develop an investing plan

Can You Invest in Both Term Insurance and ULIP?

Is the surrender value of ULIP taxable?

ULIPs Investment – A Boon or Bane?

यूलिप और उनके प्रकार क्या हैं?

How to Increase Net Worth Along with Family Protection

What Happens If I Stop Paying My ULIP Policy Premium After Paying the First Premium? Will I Still Get The Return?

How Much Wealth Can You Create from ULIP in 10 years?

ULIP Plan or Traditional Insurance Plans - Which is better?

ULIP Investment Strategy: Top Tips to Improve Your ULIP Gains

What Is Social Impact Investing and How Does It Benefit Society?

Planning For Children's Future

How to Calculate Your ULIP Returns?

What is Direct Investment and its Types?

How Can ULIP Plan be as an Investment for Your Child

FAQs on Taxation of ULIPs

Successful Financial Planning for Urban Women

ULIP Withdrawal Conditions - Before and After 5 years

Why ULIP is Better Investment for Long-Term Wealth Creation?

How ULIPs can help you achieve your financial goals

How Safe is it to Invest in ULIP plans?

Difference Between Guaranteed Savings Plan and ULIP

What is Money Management? Definition & Example

First Job? Here are Some Tips on How to Manage Finances

Is This The Right Time To Invest In ULIP? Why or Why Not?

ULIP Capital Gain Tax: Check Tax Norms for Capital Gain on ULIPs

What is Compound Interest, And How Do I Calculate it?

ULIP policy: What happens when you stop paying ULIP policy premium during lock-in period

What are ULIPs and their Types?

What are the Best Short-Term Investment Plans with High Returns?

How to Set Financial Goals for Your Future

यूलिप के फायदे और नुकसान क्या हैं?

How is the Compound Annual Growth Rate (CAGR) Calculated in ULIP?

How to Manage Your Portfolio Like a Professional?

Best Investment Options to Cover Your Child's Education

Receiving regular payouts at various stages of life

How to Apply for Death Claim Benefits in ULIPs - Kotak Life

ULIP Frequently Asked Questions (FAQ) - Kotak Life

Why Are ULIPs Called Flexible Investments?

यूनिट लिंक्ड इंश्योरेंस प्लान में लॉयल्टी एडिशन कैसे काम करते हैं

ULIP Benefits You Can Avail from Early Investing

What is a Child Money Back Plan, and How Does it Work?

Do You Know the Difference Between Savings and Investment?

Different Types of ULIP Investments in India

What is ULIP and Its Benefits?

How Much Wealth Can You Create From ULIP in 10 years?

ULIP Plans Riders You Should Know About

What are the Maturity Benefits in a ULIP Plan: Fund Value Sum Assured or Only Fund Value?

How to Cancel ULIP Policy?

Top 11 Investment Plans Available in India

उच्च रिटर्न प्राप्त करने के लिए सर्वश्रेष्ठ इन्वेस्टमेंट विकल्प

How Can a Legal Nominee Claim ULIP Benefits are the Policyholder’s Death?

What are the Best Investment Options for Beginners or Amateur Investors in India?

All you need to know about Fund Switching in ULIPs

What are Fixed Maturity Plans and Why Should I Invest in Them?

How to Build a Strong Financial Foundation For the Future?

Creating a second source of income with life insurance

What is a Bond Fund and How It Works?

How to Save Money from Salary?

What is NAV in ULIP, and How is it calculated?

Will AI be Your Future Financial Adviser? What Role Will Humans Play?

5 Reasons to Buy ULIPS for a Financially Secured Future

ULIP NAV - Everything You Need to Know

How to Create Short-Term and Long-Term Wealth with ULIPs - Kotak Life

How Increasing Your SIP Every Year Helps You Reach Your Financial Goal Sooner?

What are the Best Investment Options for Students in India?

How To Invest Money In ULIP?

What is Savings and the Importance of Saving Money

Here's are the uses of ULIP your must be aware of

ULIP Vs Life Insurance Plan Know the Difference

Why Should I Invest in ULIP?

Why are ULIPs One of the Best Tax Saving Instruments?

Top ULIP Myths That You Must Stop Believing In

Investment Options for NRIs in India

Do ULIPs Give Good Returns On Investments?

यूलिप प्लान में परिपक्वता लाभ क्या हैं: फंड वैल्यू सम एश्योर्ड या ओनली फंड वैल्यू?

Understanding ULIP Risks: What are the Odds of Losing all my Money and Projected Returns?

Unit-Linked Life Insurance (ULIPs) vs. Term Insurance

ULIPs: Suitable for all

Difference Between Linked and Non-Linked Insurance Plans

Debt ULIPs vs. Debt Mutual Funds: What's the Difference?

उच्च रिटर्न प्राप्त करने के लिए सर्वश्रेष्ठ इन्वेस्टमेंट विकल्प

How to Start Saving Money in 10 Simple Ways?

What is the Time Value of Money (TVM)?

What is a Savings Plan and What are is Benefits?

Balancing Investment Between Risk and Return on Investments

How Can ULIPs Help You Plan for Your Child's Future?

5 Best Long Term Investments To Add To Your Portfolio in 2023

Got a Salary Hike? Here’s How to Plan your investment further

Top 10 Investment Strategies to Create Wealth

How Can ELSS Funds Help You Save Tax & Create Wealth?

ULIP Plan as a Gift

How To Track ULIP Performance?

ULIP Investment Benefits You Must Know

Here's Why it's a Good Time to Explore ULIPs as an Investment

Is ULIP a Complex Financial Product?

Planning Financial Goals and Objectives of Financial Planning

Why is Portfolio Diversification Important? How to Diversify Your Portfolio?

Will You Need to Withdraw or Surrender Money From ULIP

Here's Myths on Investments in ULIP Plans

What is Mutual Funds? | How Mutual Funds Work, Definition

What's Better for Your Child's Education? Child Plans or Mutual Funds?

Know How to Invest at Every Age for Larger Returns

Can NRIs Invest in ULIP Plans Offered in India?

Best One-Time Investment Plans in India

Are Investment Returns Guaranteed in a ULIP?

Why Should You Invest in NPS?

Corporate Bonds: Meaning, Types & Benefits

What is SIP Calculator, and How it Works?

Savings Plan for Grandchildren

What are Index Funds, and How Do They Work?

Are Money Back Policies Helpful? A Complete Guide

Factors Affecting Share Prices In The Stock Market

How to Make Your Financial Portfolio?

Top 5 Principles That Need to be Followed for Wealth Creation

वित्तीय संपत्तियां और उनके प्रकार

Long Term Savings Plan - Best Savings Investment Plans in India

Why ULIP Should Be a Part of Your Investment Portfolio?

Importance of Portfolio Management

How to Fix the 9 Most Common Financial Problems Your Family is Facing

How to Use Recurring Investment Strategies to Build Wealth?

How to Plan your Investment to Achieve Periodic Financial Goals?

ULIP vs FD - Which is Better and Why?

Can You Have ULIP Plan and Health Insurance Plan Both?

4 Rules To Keep In Mind To Secure Your Child’s Future Financially

What are Financial Assets & their types?

Can ULIP Policy be Transferred?

What are Some of the Safest Investment Options in India?

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

How to Manage Inheritance Money?

Beginner's Guide to Wealth Creation: Meaning, Strategies, & Importance

What is Lock-In Period in ULIPs?

What are the things to consider before buying ULIPs?

8 Charges in ULIP That You Must Know

What is ULIP Plan, and How Does it Work?

Difference Between ULIP and Endowment Plan?

Does Rupee Cost Averaging Work In Unit-Linked Insurance Plans?

Why Do You Need A ULIP Plan - All You Need To Know

What is Fund Value in ULIP?

Tax-Deferred Savings Plan: Overview, Benefits, Works

5 Reasons to Have a Child Education Plan

Investments Options to Buy a house in India

What is ULIP Renewal?

What is Equity Mutual Funds: Meaning, Types & Benefits

Is ULIP A Good Investment Option?

5 Reasons Why ULIP Plans are One of The Best Retirement Planning Instruments

Which is Better – FD, Mutual Fund, SIP, or ULIP?

यूलिप में 8 शुल्क जो आपको अवश्य जानना चाहिए

What are the Best Investment Options for Young Adults?

The lesser-known facts about ULIP policy that customers should be aware of?

Which is a Better Investment - Mutual Funds Or ULIP?

What Is Financial Planning?

6 Important Tips to Maximize Your Gains with ULIP Investments

What is Premium Redirection in ULIPs Plans | ULIP Insurance Plans | Kotak Life Insurance

What is Fund Switch in ULIP? And ULIP Fund Switching Techniques

Planning For Son or Daughter's Wedding

8 Important Tips to Maximize Gains with ULIP Investments

All you need to know about claiming maturity proceeds from Ulip

यूलिप के फायदे (Benefits of ULIP in Hindi)

Can ULIP Help in Achieving Short-Term Financial Goals?

Learn About Safe Investments with High Returns in India

Four Financial Lessons from The Vedas on Living Life to The Fullest

What are the Minimum and Maximum Investments in ULIP?

What is Partial Withdrawal in ULIPs?

Rate of Interest on Different Investment Plans in India

Know Why You Should Stay Invested in Your ULIP Plan

Top 5 Investment Options in 2022 for Healthy Returns

Here's Whether You Should Link ULIP Plan with your Term Insurance

Best Investment Plans For You To Invest In 2023

What is the Estimated Return Percentage on ULIP? Do Investors Get Compound Interest?

How has ULIP Grown Over the Last 3 years?

Single Premium ULIP or a PPF - Which One is Better?

Learn About Safe Investments with High Returns in India

Planning for Your Child's Higher Education? Explore These Investment Options

ULIP Tax Benefits: यहां निवेश करने पर मिलते हैं 5 बड़े फायदे

Are Gains from ULIP Sale Taxable?

ULIP As An Investment Option For Senior Citizens

Which are the Best ULIP Plans in India for Children?

Safe Investment Options with High Returns for FY 2018-19

What are loyalty additions, and how do they work in a ULIP?

Endowment Plan vs Fixed Deposit?

How to Plan Your Child's Education - A Step-by-Step Guide