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How to Choose the Best ULIP Plans to Invest in 2023?

The unit-linked insurance plan, or ULIP as it is more commonly known, is a type of insurance policy that seeks to provide both wealth building and life insurance.

  • 6,277 Views | Updated on: Oct 06, 2023

A Unit-Linked Life Insurance (ULIP) plan is a life insurance plan that helps the policyholder to create wealth by investing their money in the financial market, along with offering a security blanket against various uncertain life incidences. It combines investment and life insurance to help you achieve long-term financial goals and provide your family security in case of your untimely demise. Under Section 80C of the Income Tax Act 1961, the best ULIP funds can also help you claim deductions and offer you tax-free benefits.

Key takeaways

    This is how to choose the finest ULIP plan in India, one that meets your particular financial goals:

  • ULIP selection should be based on personal financial goals.
  • Choose the right level of life insurance protection.
  • Stay invested for a very long time.
  • Before you invest, be aware of any fees associated with the plan (premium charges, management charges, etc.)
  • Learn about any tax benefits you may receive.
  • Note the characteristics of various ULIPs.

Understanding the plan better before making any decision will help you to make an informed decision for the future. Below mentioned ways will explain how to choose the best ULIP plan to invest in 2023.

How to Choose the Best ULIP Plans?

Understand the Key Features of your ULIPs

ULIP offers the policyholder the advantage of life insurance coverage and wealth creation. However, to get the best out of it, you need to understand the critical features of ULIP:

Fund Switch

If the policyholder is unsatisfied with funds or in case of losses, they can switch their funds to those that match their needs or are profitable.

Premium Redirection

The policyholder can invest their future premiums in funds other than their base fund.

Partial Withdrawal

The policyholder gets the option to withdraw a part of their money.


This option allows the policyholder to invest the surplus money either in one go or multiple times in their existing policy.

Choose a ULIP Plan Depending On your Needs

A ULIP plan allows the policyholder to invest their money in equity, debt or both. Investing in equity helps to offer long-term high growth potential, whereas debt helps preserve wealth. Based on the risk appetite and needs, the policyholder can choose to invest in different types of ULIP.

Take the Right Amount of Life Cover

ULIPs offer policyholders them to achieve their life goals and secure themselves and their families from any uncertain situations. They provide a lump sum amount called the Life Cover so that the policyholder’s loved ones can stay financially secure even after their demise. To increase your family security, you can increase the life cover amount.

Stay Invested with ULIPs for a Longer Time Frame

Besides offering life cover, the best ULIP funds also help create wealth. In case you stay invested in ULIPs for a more extended period, the company even provides you with specific bonuses in the form of loyalty additions and wealth boosters to further help you to grow your wealth.

Avail Tax Benefits

Under the Income Tax Act 1961, you can save your hard-earned money from taxes and avail of various benefits at different stages of your life insurance policy.


Under the Income Tax Act 1961, you receive tax benefits on your premium payments.

Exclusive Switching Advantage

Under this stage, the debt-equity Switches are not liable to tax.


Under the third stage, you also receive tax-free maturity benefits that are subjected to conditions under Sec 10(10D)

Know your Charges in the ULIP

Best ULIP funds help the policyholder to meet protection as well as the investment need. However, both investments have some associated charges; therefore, it is essential to know the details of the costs before even investing in one. Some of the charges are as follows:

Here is a quick list of the most frequent fees associated with holding ULIP plans in one’s portfolio.

Premium allocation charges

Typically, the premium allocation fees are only assessed during the first several years of a ULIP plan. It speaks about the portion of the premium that is withheld prior to assigning the policy’s units. These fees are imposed by the insurance company to pay the upfront costs associated with providing a policy, such as commission fees, distributor fees, and underwriting costs.

Policy administration charges

These fees are subtracted to pay the business’ administrative expenses, which aid in maintaining the ULIP policy. For the first few years, the fees are typically fixed, after which they gradually rise by a specific amount each year.

Mortality charges

The insurance provider assesses these fees in exchange for offering the policyholder insurance coverage. Once a month, mortality fees are assessed and withdrawn from the funds of your choice. The sum assured, the policyholder’s age, and their health status all have a role in the percentage charge.

Fund switching charges

The ability to change funds at any moment is one of the key advantages of a ULIP plan. Although some ULIP provider businesses don’t charge any costs for fund shifts and hence permit free moves, other organisations impose small switching fees, ranging from ₹100 to ₹500.

What are the Advantages of ULIPS?

Transparent Fees Structure

We demand the highest level of openness and no extra fees before investing our hard-earned money in any financial instrument. The cost structure for the ULIP programmes is well-organized and clearly stated in their policy wording document. Similar to this, the business also gives policyholders account statements on an annual and quarterly basis, along with daily net asset value (NAV) reporting and fund performance, to assist them maintain tabs on their assets.

High Degree of Liquidity

One of the nicest aspects of any ULIP plan is the ability to partially withdraw investments once the five-year lock-in period is over. The partial withdrawals option enables the policyholder to take out as much of their invested funds as they require at any time.

Tax Benefits

ULIPs are fantastic financial tax-saving tools that frequently offer specific benefits at each level of insurance. Under Sections 80C and 80D, the policyhol=der is eligible for tax benefits on premium payments. According to Sections 10 and 10D of the Income Tax Act of 1961, both the returns and the maturity benefits are tax-free

Dual Benefit of Insurance and Investment

In fact, this is the USP behind ULIPs, which combine investment and insurance into a single plan to provide a double advantage. Without really taking part in the stock market, the policyholder of ULIPs receives exposure to growth in the equities and money market. Additionally, this has the added advantage of life insurance, which meets your insurance needs by offering death and maturity benefits.


In ULIPs, the charges are reduced in the long run, helping to increase wealth creation. To choose the best ULIP, you should compare different plans and select the one that charges a minimal amount in the form of Premium Allocation, Policy Administration, Mortality, and Fund Management Charges.

Now that you have understood how to choose the best ULIP plans, you can research and make an informed decision.

- A Consumer Education Initiative series by Kotak Life

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

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