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Is ULIP A Good Investment Option?

A ULIP provides insurance coverage while also offering profits through investment fields. Read this blog to understand why ULIP is a good investment.

  • 3,498 Views | Updated on: May 17, 2024

Are you considering investing your hard-earned money but feeling overwhelmed by all the options? You are not alone. If you are new to the world of financial planning, investing can be challenging. One investment option that often comes up in discussions is ULIP, but is it a good choice for you?

Key Takeaways

  • ULIPs are hybrid investment-insurance plans that provide life coverage and market-linked returns.
  • They offer flexibility regarding fund switching, partial withdrawals, and tax benefits.
  • These are good options for long-term investors with a moderate to high-risk appetite.
  • ULIPs can be a good way to profit from multiple investment sources and achieve your long-term financial objectives.

Financial planning entails much more than the money you earn or save monthly. Most of us have been taught to work hard and save a certain amount of our earnings. However, your efforts should not end at savings; investing in the right places is important to boost your financial portfolio.

In recent years, ULIP or Unit Linked Insurance Plans have caught people’s interest as a smart investment choice. If you want to learn more about this financial investment tool, this blog will walk you through the basics of ULIPs and help you decide if these plans are a wise investment choice.

Basics of ULIP or Unit Linked Insurance Plan

ULIP is not just an insurance or investment plan but a hybrid of the two. It is one of the most popular financial instruments available to investors. These investment plans provide insurance coverage while also producing profits through investment sources. Like mutual funds, the insurance provider launches a new plan and encourages investors to participate. Further, ULIP invests in stocks, commodities, and debt instruments. If you are looking for the best ULIP plans, carefully examine the features and benefits of a ULIP investment plan.

Benefits of Purchasing a ULIP Plan at the Earliest

If you are planning to buy a ULIP plan, then you must understand the benefits and features of this plan. Let us take a look at some of the benefits of ULIP plans:

Lock-In Period

ULIP is a long-term investment plan that has a five-year lock-in period. This makes it a great option for developing a steady investment habit. The policy’s grant date usually specifies the lock-in period, and the premium must be paid monthly or yearly in one lump sum. In addition, following the 5-year lock-in term, the policyholder can cancel the insurance and withdraw assets as needed.

Switching Funds & Flexibility

ULIP plans are particularly flexible since they allow you to transfer funds anytime during the policy’s term. It is, in fact, the only financial instrument that can be used in so many different ways. The insured can move all or part of their investment across funds. Depending on your needs and the fund’s performance, you can pick any of them.

Tax Exemptions

The tax exemption is one of the most significant benefits of ULIP. As per Section 80C of the Income Tax Act, 1961, you can reduce your tax burden by up to ₹1,50,000. Additionally, the maturity benefit of ULIPs is tax-free under Section 10 (10D) of the Income Tax Act.

Increased Returns

ULIP is the way to go if you want to make more money and have a good risk appetite. This scheme beats all other financial products due to its equity benefit. The premiums you pay are invested in various asset types through various funding sources in ULIPs.

Partial WithdrawInsurance Needs

You can always use the partial withdrawal choice offered by Unit Linked Insurance Plans in the case of an emergency. Partially withdrawing funds is free of charge. Nevertheless, you should double-check with your insurance carrier.

Is ULIP Right for You?

Well, it depends on your financial goals and risk tolerance. Here is a quick checklist to help you decide:

Long-term Goals

If achieving long-term financial objectives is a priority for you, and you can stay invested for at least five years, the ULIP investment plan might be worth considering.

Risk Appetite

If you are comfortable with some risk and want the potential for higher returns, ULIPs with equity exposure could be suitable.

Tax Planning

If you are interested in saving on taxes while investing, ULIPs offer attractive tax benefits.


Be aware of the charges associated with ULIPs, and make sure you understand how they can impact your returns.

Insurance Needs

If you also need life insurance coverage, ULIPs combine investment and protection.

Way Forward

Financial planning goes beyond merely earning and saving; it’s about making informed decisions to secure your financial future. If you wish to profit from many investment sources, look up the best ULIP plans that align with your long-term financial objectives and provide significant returns. ULIPs can offer a unique blend of investment and insurance, making them a compelling option for those seeking long-term wealth creation.

- 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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