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What are the Benefits of ULIP - Explained

Unit Linked Insurance Plans (ULIPs) are insurance products that combine investment and insurance into a single package. Read ahead to know its benefits.

  • Apr 14, 2022

Investing money to secure your future is becoming the norm now. However, at the same time investing in the right place can be a challenge for many. There are so many investment options and opportunities available today that it is quite tough to pick the right one for yourself. The main goal behind picking the right investment plan is to ensure that the returns match your future financial needs, be they short-term or long-term financial goals.

Key takeaways

  • ULIP is one of the popular investment plans among investors these days.
  • Unit Linked Insurance Plans, commonly known as ULIPs, are financial instruments that offer dual benefits of investment and insurance.
  • ULIP plans allow you to have a transparent investment scheme.
  • When you opt for ULIP, you can make a partial withdrawal once the lock-in period is over.
  • ULIP allows you to keep up pace with the market growth and inflation as a part of your premium is invested in market funds.

What is ULIP?

ULIP is one of the popular investment plans among investors these days. Being a modern investment tool, it allows investors to diversify their portfolios, unlike traditional investment options. In addition to the ULIP benefits, you also get the option to invest your money in the market. Not only this, the ULIP tax benefits serve as icing on the cake. ULIP tax benefits are uniform and regularized by the government during the Budget 2023 session. Thus, you can avail of the ULIP tax benefits, irrespective of the ULIP plan you opt for.

Find the right information about ULIPs, their advantages, and disadvantages of it, and make an informed decision.

This article will briefly discuss ULIP benefits, the benefits of ULIP over mutual funds, and ULIP insurance benefits.

Top 7 Unit Linked Insurance Plan(ULIP) Benefits

Unit Linked Insurance Plans, commonly known as ULIPs, are financial instruments that offer dual benefits of investment and insurance. It is a combination of life insurance and investment, where a part of the premium paid goes towards providing insurance coverage, and the remaining amount is invested in various market-linked funds.

ULIPs have gained popularity in recent years due to their unique features and benefits. Here are 7 major benefits of ULIPs in detail.

Flexibility And Diversity

When an investor opts for a ULIP policy, he has a host of high-risk, medium-risk, and low-risk fund options to choose from under the same plan. The policyholder can choose as per their risk-taking appetite.

In addition to this, you also get ULIP insurance benefits. One gets to flexibly choose premiums based on their financial needs or the sum assured. Moreover, if you want to add more to your policy above your premium by opting for ULIP top-up option.

So, in case you see a good investment opportunity, or you earn a bonus that you want to invest in, then ULIP insurance benefits allow you to do that. Also, with ULIP, you get to have market-linked financial growth without directly investing in the stock markets and get a life-cover ULIP benefit.


When we talk about the top benefits of Unit Linked Insurance Plans (ULIP), transparency is an important one. ULIP plans allow you to have a transparent investment scheme. When opting for ULIP, the policyholder is made aware of the complete charge structure, the investment value, return rate expectations, and other important details for the complete policy tenure.

This is important because it is your right as an investor and a great move to understand all the important details about a policy before putting your hard-earned money into it.

Partial Withdrawal

Liquidity is a major factor that decides whether a person will invest in a financial scheme/policy/plan or not. When you opt for ULIP, you can make a partial withdrawal once the lock-in period is over.

Tax Benefits oOf Unit Linked Insurance Policy

ULIP plans tax benefits are something that attracts many investors towards it. According to the IT Act Section 80C and Section 10 (10D), you can easily take ULIP plans tax benefits. The premiums of up to ₹1.5 lakhs/annum are exempted from tax, and the maturity amount is also exempted from tax.

However, to prevent the misuse of ULIPs, the government brought some changes to higher investment in ULIPs. ULIP has better tax benefits than mutual funds as mutual funds qualify for exemption under the sections mentioned above in the IT Act.

Great Disciplined Long-Term Savings Tool

Honestly, ULIPs serve as a great long-term investment tool that helps you in creating good savings in the long term. Not only that, it allows you to keep up pace with the market growth and inflation as a part of your premium is invested in market funds.

Long-term wealth creation

ULIPs are a long-term investment option that can help policyholders create wealth over the long term. By investing in market-linked funds, policyholders can benefit from the potential returns offered by the equity market. Additionally, ULIPs have a lock-in period of five years, which helps policyholders stay invested for the long term.

Dual benefits of insurance and investment

The primary benefit of ULIPs is that they offer both insurance and investment benefits. The insurance component of ULIPs ensures that the policyholder’s family is financially protected in case of any unforeseen event. At the same time, the investment component helps the policyholder create wealth over the long term.

Wrapping Up

ULIPs offer a unique combination of insurance and investment benefits, along with flexibility, transparency, tax benefits, and long-term wealth creation. However, before investing in ULIPs, it is important to understand the charges, fees, and risks associated with the investment. Additionally, policyholders should choose the investment portfolio based on their risk appetite and financial goals.

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

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