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Are Investment Returns Guaranteed in a ULIP?

Market-linked investments (including ULIPs) yield market performance-based returns. Even though ULIP plan returns are not guaranteed, you can invest in them for a long time and develop your funds. Unit-linked Insurance Plans (ULIPs) are not new in the i

  • Jan 30, 2023

    Key Takeaways

    Primary ways to generate high investment returns from the ULIP plan are as follows

    1. Invest in Liquid Funds

    2. Utilize Computerized Portfolio Management

    3. Invest in Debt Funds

    If you are a risk-averse investor, there is certainly one issue that occupies most of your thoughts. Specifically, the question: do ULIPs give assured investment returns? To address this topic, let’s begin with the fundamentals.

What is ULIP?

The ULIP, or Unit Linked Insurance Plan, combines life insurance security with the growth potential of assets tied to the stock market. The policyholders are the primary focus of a universal life insurance plan. Its principal purpose is to provide you with life insurance while also allowing you to build wealth over time with high-return investments.

As with all life insurance policies, you’ll have to pay recurring payments to your insurance company in return for these benefits. With the money you make from your ULIP investment, you can save for a down payment on a house, your kid’s college tuition, or even your retirement.

How Do ULIPs Work?

When purchasing a ULIP, it is up to the policyholder to determine the amount of coverage required and the time frame for that coverage. If you select a restricted premium plan, you’ll also have to decide how you’d want to pay your premiums and for how long. The insurance company determines the premium based on your personal information and policy details, such as age, gender, and driving record.

Your ULIP policy’s investment portion gives you access to various high-return investment options. The fund’s value during the policy’s life will rise or fall following the performance of the underlying markets. Due to the potential for significant partially guaranteed ULIP returns at maturity due to advantageous market fluctuations, ULIPs help build long-term wealth.

Are Investment Returns Guaranteed in a ULIP?

ULIP plans are one of the few investment-linked plans that provide excellent returns and life insurance. A ULIP policy can give you a regular investment return while safeguarding your family. This investment is a fantastic short and long-term partner due to its cheap fees. In addition, ULIP returns are subject to long-term capital gains tax, whereas death benefits are tax-free. Finally, it assists in limiting volatility by offering many fund alternatives. So, now that you know how ULIPs operate, let’s get back to the main and most important point.

Can you count on guaranteed ULIP returns?

The returns from a ULIP plan are paid out two ways: upon the policyholder’s death and at the plan’s maturity.

Hypothesis 1: The policyholder dies

1. The higher the amount promised or the value of the fund.

2. The combined amount of the guaranteed payout and the value of the underlying investment.

Hypothesis 2: The policyholder lives until the maturity of the ULIP investment plan

The insurance company will then provide the policyholder with the fund’s current value. As the plan matures, this amount represents the investment’s worth on that day. Therefore, it is clear that ULIPs do provide secure payouts in the event of the policyholder’s death, as illustrated by the examples given above.

Ways to Get Guaranteed Returns in ULIPs

Even though ULIP earnings are not guaranteed, its characteristics can help you achieve healthy, stable returns with no risk. This is how.

1. Invest in Liquid Funds

2. Utilize Computerized Portfolio Management

3. Invest in Debt Funds

Did You Know?

Section 80C under the Income Tax Act of 1961 allows for a tax deduction on ULIP donations, while Section 10D of that act exempts death benefits from taxation. Therefore, ULIP premium should be considered for making maximum use of the available tax advantages while arranging the taxes aspect of your investments.


This summarizes how ULIPs operate and how the profits they give, while somewhat assured, cannot be estimated in advance. ULIPs offer several advantages for policyholders and their families. Consequently, if you are on the fence about obtaining a ULIP, the information provided above should help you make an informed financial choice.

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

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- A Consumer Education Initiative series by Kotak Life

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