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

ULIPs offer you the dual benefit of insurance and market-linked investment while helping you in saving taxes at the same time.

  • Jul 25, 2022

Accumulation of wealth over time can only be done through wise investment while taking care of your regular expenses and priorities. While there are multiple ways to create wealth, modern investment tools like Unit Linked Insurance Plans (ULIPs) are much more innovative options. The main goal of most investors is to build a decent corpus for planned purposes or use later in life as per the requirements.

Rules of Investment

When we talk about the basic rules of investment, then two things are always advised by the experts,

1. Staying invested for longer terms

2. Keeping your portfolio diverse

Both of these criteria are fulfilled in a single ULIP plan with the additional benefit of life insurance. Not only this, but ULIPs also generate a decent return in the long run, which are exempted from tax under Sections 80C and 10(10D) of the Income Tax Act. The features and benefits that ULIPs offer in one single policy are the things that make them a much better option compared to other investment options. And when we talk about long-term investment, the return on ULIPs in 15-years of 20-year tenure is significant.

Let’s understand a little more about how ULIP is a better long-term investment option through this article. We will also discuss the longer-term return, like ULIP returns in 15 years and ULIP returns in 20 years, to get a better picture of long-term investment.

Why ULIPs for long-term investment?

While most people try to invest in traditional and secure government-backed products like Public Provident Funds and pension schemes, these options offer limited growth and restrict the investor to a limit. Also, since inflation has skyrocketed in the last decade, staying invested in these traditional options may be safest. But do you think it is worth the growth you get on your investment?

ULIPs offer you the dual benefit of insurance and market-linked investment while helping you in saving taxes at the same time.

4 Facts That Make ULIP a Great Long-Term Investment

1. Lock-in Period:

With a minimum of a 5-year lock-in period ULIPs are a great way to get habituated to a disciplined investment and take baby steps toward long-term investment. Once you stay invested for five years, you understand the benefits and importance of keeping your money invested for longer.

The good thing is that ULIPs allow making a partial withdrawal in case of an emergency or to meet any trouble.

2. Flexibility:

Options like fund switching and premium top-ups make ULIPs very flexible. You also get the opportunity to keep your investment diversified inside the ULIP policy itself by opting for different funds as per your risk appetite. Thus, you can maintain a balanced growth by choosing from equity, debt, hybrid, and other options to invest in and switch as per market trends over the policy term. Also, the possibility of top-up premiums helps you add more funds whenever you want to add more to your investment.

3. Better returns than other market-linked products:

ULIP offers a better return than most of the other market-linked investment products. When you stay invested for longer terms, the interest on your investment is compounded, and at the same time, it grows alongside the market. Thus ULIPs have a great potential to earn good returns in the long run.

4. Tax benefits of ULIPs:

One of the critical features of ULIP is tax savings. When you opt for a ULIP policy, your premium, proceeds and maturity amount is exempted from tax subject to Section 80C and Section 10 (10D) of the Income Tax Act. However, reviewing policy documents before opting for a ULIP policy is strongly advised.


In totality, when you compare ULIP returns in 15 years or ULIP returns in 20 years with the traditional investment options and other market-linked investment products, you will conclude that the dual benefit of insurance and investment, in addition to the ability to switch between funds and save tax makes ULIP a great long-term investment option. The returns that you get on ULIP, in addition to bonuses and other benefits, is a deal that makes it unique and thus popular.

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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