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Why Are ULIPs Called Flexible Investments?

What does unit-linked insurance plan flexibility entail? Find out why ULIPs are the ideal long-term investing that makes ULIP a flexible investment option.

  • Mar 28, 2022

The necessity to invest in beneficial monetary instruments is at the forefront of the change due to the ever-increasing financial requirements caused by rising inflation and a fast-changing global economic landscape.

In recent years, investing has gained a new level of popularity; the notion of investment is no longer limited to real estate but has expanded to include financial investment tools with the potential for high-profit returns.

As a result, you must invest in a financial instrument that allows you to shift your funds with simplicity while also providing excellent returns. ULIP insurance can help in this situation.

What is ULIP policy?

A ULIP is not an insurance plan or an investment plan; rather, it is a hybrid of the two. ULIP plan is one of the newest financial instruments available to investors. Unit-Linked Insurance Plans are insurance plans that 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. Thus, ULIP plans to invest in stocks, commodities, and debt instruments, and ULIP fund performance depends on the capital market momentum.

Why are ULIPs called flexible investments?

Features that Make ULIP a Flexible Investment Options

Fund Switching Flexibility

ULIP insurance policies include the ability to move funds, giving the policyholder many options. As an investor, you have the option of investing in debt or equity funds or in a portfolio that includes both equity and debt funds. In addition, you can switch your assets from one fund to another under this policy, and the ULIP interest rate depends on the market condition. Furthermore, these swaps may be for full or partial units, making them more relevant. During the policy years, you, as the investor, can swap between fund alternatives at any moment. The equity or debt exposure can range from zero to one hundred percent, with and without varying debt, cash, and securities combinations.

Life Cover Choice

You may determine the amount of insurance coverage you desire in a ULIP investment. The minimum Life Cover granted by most ULIPs is ten times your yearly premium sum. However, according to the plan and the insurance provider, you may be able to choose a Life Cover value of up to 40 times your yearly premium or more.

Partial Withdrawal Provision

Before the policy term concludes, you, as a policyholder, have the option of withdrawing a portion of your own earned fund values. This option is quite valuable since it may assist in unexpected cover costs. However, it’s worth noting that the entire sum isn’t accessible for withdrawal, and this function is only available after the stipulated five-year lock-in time has passed.

Premium Payment Structure

The premium payment term, or PPT, is the period during which you must pay your premiums. ULIPs provide you with the option of paying your premium in a variety of ways. For example, you have the option of paying the premium monthly, quarterly, annually, or as a one-time payment.

ULIP Tax Benefits and Claims

Three key benefits come with the ULIP plan. First, under Section 80C and Section 10 (10D) of the Income Tax Act, 1961, premium payments, maturity benefits, and death benefits are all tax-free up to a certain sum.

Furthermore, most investments, notably death benefits, provide lump-sum payments. A ULIP, on the other hand, allows you to get your benefits in one lump amount or instalments.

ULIP Tax Benefits and Claims

To summarise, the best ULIP plan to invest in is one that is aligned with your personal and financial goals for the future, not the one that gives the most flexibility or return. Therefore, before purchasing a ULIP policy, it is recommended that you perform comprehensive research and market analysis. So what are you waiting for? Buy the ideal ULIP insurance for your family now.


1.What is Meant by Flexibility in Investment?

The ability to invest in a lump sum or, over time, switch between different schemes or asset classes while still belonging to the same fund family or guarantee a monthly income at predetermined periods are all examples of flexibility. A mutual fund or other pooled investment with significant investment decision-making and allocation freedom is referred to as a flexible investment.

Flexible funds may be able to invest across all asset classes, although they often have a specific universe of securities as an objective.

Instead of allocating assets specifically to certain market segments, investors in these funds frequently invest based on the experience of well-known managers.

2.Investment Flexibility in Unit-Linked Insurance Plans?

A variety of high, medium and low-risk investment possibilities are offered through ULIPs through several funds that are part of the same plan. Depending on how comfortable you accept risks, you can choose an acceptable strategy.

Depending on your demands, ULIPs give you the freedom to choose either the premium or the sum assured. Additionally, they give you the freedom to adapt your investment portfolio through top-ups to maximise investment opportunities brought on by changes to the outside environment or your personal income flows. One of the most adaptable investing strategies in India is unit-linked insurance plans or ULIPs. You can utilise this investment to achieve practically all of your major financial objectives. ULIP can help you achieve your goals, whether they are to invest safely to accumulate a specified corpus in five years or to have a wonderful retirement in thirty.

Unit Linked Insurance Plans’ concept of flexibility resembles the following:

  • Choose the asset class
  • Allocate the funds
  • Decide on the term for paying the premium
  • Consider the advantages to be received
  • Implement a systematic withdrawal strategy.

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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