Close

Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak e-Invest

Insurance and Investment in one plan.

Kotak e-Term

Protect your family's financial future.

Kotak Guaranteed Fortune Builder

A plan that offers guaranteed income for your future goals.

Kotak T.U.L.I.P

A plan that works like a term plan, and Earns like ULIP Plan.

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family.

Kotak Assured Pension

A plan that offers immediate or deferred stream of income

Kotak Lifetime Income Plan

Retirement years are the golden years of life.

Kotak Guaranteed Savings Plan

A plan that offers long term savings and life cover.

Close

Get a Call

Enter your contact details below and we will get in touch with you at the earliest.

  • Select your Query

Thank you

Our representative will get in touch with you at the earliest.

Unit Linked Health Insurance Plan

A ULIP health plan combines health coverage with investment, allowing policyholders to protect their well-being while growing their wealth through market-linked investments.

  • 5,562 Views | Updated on: May 02, 2024

For individuals seeking comprehensive coverage for both health and wealth management needs; Unit Linked Health Insurance Plans (ULHPs) have emerged as a versatile financial tool. These plans offer a unique combination of health protection and investment opportunities, making them increasingly popular among individuals looking for holistic financial solutions.a

Key Takeaways

  • ULHIPs offer both health coverage and investment opportunities in a single plan.
  • Policyholders can choose from various investment funds like equity, debt, or balanced funds.
  • Premiums are divided between insurance coverage and investment allocation.
  • ULHIPs provide the potential for higher returns compared to traditional health insurance plans.
  • Policyholders have the flexibility to switch between investment funds based on their risk appetite.
  • Tax benefits are available under prevailing tax laws for premiums paid towards ULIPs.

Traditional health insurance plans primarily focus on providing financial coverage against medical expenses incurred due to illness or accidents. On the other hand, ULIP investment plans offer the potential for wealth accumulation through investment in various market instruments. Unit Linked Health Insurance plans bridge the gap between these two by integrating health protection with investment features, thereby offering policyholders dual benefits under a single plan.

What is a Unit Linked Health Plan?

A ULIP health insurance or Unit Linked Health Insurance plan operates on the principle of combining insurance coverage with investment options. Similar to other health insurance plans, it provides financial protection against medical expenses arising from illnesses, accidents, or hospitalization. However, what sets Unit Linked Health Insurance plans apart is their investment component.

In ULIP health insurance plans, a portion of the premium paid by the policyholder is allocated towards providing health coverage, while the remaining portion is invested in a variety of funds, such as equity, debt, or balanced funds, depending on the policyholder’s risk appetite and financial goals.

How Does a Unit-Linked Health Plan Work?

When you purchase a ULHP, a portion of your premium is allocated towards providing health coverage, while the remaining portion is invested in various funds, such as equity, debt, or balanced funds, based on your preferences and risk appetite. Let us see how it works:

Insurance Component

This portion of the premium is utilized to provide health coverage, including expenses related to hospitalization, medical treatments, surgeries, and other healthcare-related costs. The insurance component ensures that you have financial protection against unforeseen medical emergencies.

Investment Component

The remaining portion of the premium is allocated towards investments in different funds, typically managed by the insurance company. These funds are linked to the capital markets and offer the potential for wealth accumulation over the long term.

Investment Mechanism

The investment component of a ULHP operates similarly to mutual funds. Your premiums are invested in ‘units’ of the chosen funds, and the value of these units fluctuates based on the performance of the underlying assets in the fund. The investment funds may include equity funds, debt funds, balanced funds, or a combination thereof, allowing you to diversify your investment portfolio based on your risk tolerance and financial goals.

Unit Allocation

The premiums you pay are used to purchase units in the selected funds at the prevailing unit price. The number of units allocated to you depends on the premium amount and the current unit price of the funds. As the value of the underlying assets in the fund fluctuates, the unit price may rise or fall, impacting the value of your investment.

Fund Switching and Flexibility

One of the key features of Unit Linked Health Insurance plans is the flexibility they offer in terms of investment management. Policyholders have the freedom to switch between different funds or adjust their investment allocations based on changing market conditions or personal preferences. This allows you to optimize your investment strategy over time and potentially maximize returns.

What are the Features and Benefits of a Unit-Linked Health Plan?

Unit Linked Health Insurance plans have gained significant attention in the field of insurance and investment, offering a unique combination of health coverage and wealth creation. Some of its features are as follows:

Comprehensive Health Coverage

Unit Linked Health Insurance plans provide extensive health insurance coverage, encompassing a wide range of medical expenses, including hospitalization, surgeries, treatments, and diagnostic tests. This comprehensive coverage ensures that policyholders are financially protected against unforeseen medical emergencies, offering peace of mind and security for themselves and their families.

Investment Potential

One of the distinguishing features of Unit Linked Health Insurance plans is their investment component, which allows policyholders to invest a portion of their premiums in various funds such as equity, debt, or balanced funds. This investment potential offers the opportunity for wealth accumulation over the long term, as the funds are linked to the performance of the capital markets. By harnessing the power of compounding and market growth, Unit Linked Health Insurance plans enable policyholders to build a corpus for future financial goals.

Tax Benefits

Unit Linked Health Insurance plans offer attractive tax benefits to policyholders. Premiums paid towards Unit Linked Health Insurance plans are eligible for tax deductions under Section 80D of the Income Tax Act, providing additional savings on taxable income. Additionally, the investment gains accrued through Unit Linked Health Insurance plans are tax-free, and subject to certain conditions, making them a tax-efficient investment option for individuals.

Flexibility

Unit Linked Health Insurance plans offer a high degree of flexibility, allowing policyholders to customize their plans based on their individual needs and financial goals. Policyholders have the flexibility to choose the sum insured, select investment funds, adjust premium payments, and switch between funds as per their changing requirements. This flexibility ensures that Unit Linked Health Insurance plans can adapt to the evolving needs and preferences of policyholders over time.

Partial Withdrawals

Unit Linked Health Insurance plans typically allow policyholders to make partial withdrawals from their investment component after a certain lock-in period. This feature provides liquidity and flexibility to policyholders, allowing them to access funds in case of financial emergencies or to meet specific financial goals without surrendering the policy entirely.

Top Ups

Unit Linked Health Insurance plans offer the option of top-up premiums, allowing policyholders to increase their investment in the plan at any time during the policy tenure. Top-ups enable policyholders to enhance their investment corpus and potentially maximize returns over the long term, providing an avenue for additional savings and wealth creation.

Long-term Financial Security

By combining health insurance coverage with investment potential, Unit Linked Health Insurance plans offer long-term financial security to policyholders and their families. The comprehensive coverage ensures protection against medical expenses, while the investment component provides the opportunity for wealth creation and financial stability in the future.

Goal-based Planning

Unit Linked Health Insurance plans facilitate goal-based financial planning, allowing policyholders to align their investments with specific financial objectives such as retirement planning, children’s education, or purchasing a home. By setting clear financial goals and leveraging the investment potential of Unit Linked Health Insurance plans, policyholders can work towards achieving their aspirations and securing their financial future.

Benefits and Considerations

Like any other financial product, Unit Linked Health Insurance plans come with both advantages and considerations that individuals should carefully weigh before making a decision.

Dual Benefits

Unit Linked Health Insurance plans provide both health insurance coverage and investment opportunities, offering a comprehensive financial solution.

Market-linked Returns

The investment component of Unit Linked Health Insurance plans offers the potential for higher returns compared to traditional insurance plans, as it is linked to the performance of the capital markets.

Costs and Charges

It is essential to consider the various charges associated with Unit Linked Health Insurance plans, such as premium allocation charges, fund management fees, and policy administration charges, which can impact the overall returns.

Things to Keep in Mind Before Selecting the Unit-linked Health Insurance Plan

Selecting the right ULHIP is a crucial decision that requires careful consideration of various factors to ensure it aligns with your healthcare needs and financial goals. Here are some essential things to keep in mind before finalizing your ULHIP choice:

Health Coverage and Investment Needs

Before choosing a ULHIP, assess your healthcare needs and investment objectives. Determine the level of health coverage you require, considering factors such as your medical history, family medical history, and potential future healthcare expenses. Additionally, clarify your investment goals and risk tolerance to select investment funds that align with your financial objectives.

Reputation of the Insurance Company

Research the reputation and credibility of the insurance company offering the ULHIP. Look for reviews, ratings, and customer feedback to gauge the company’s track record in terms of claim settlement, customer service, and financial stability. Opting for a reputable insurer ensures reliability and peace of mind regarding the management of your policy and claims processing.

Plan Features

Evaluate the features and benefits offered by the ULHIP, including health coverage, investment options, flexibility, and additional perks. Pay attention to factors such as coverage limits, exclusions, fund performance, and policy terms and conditions. Choose a plan that offers comprehensive coverage and investment flexibility to meet your specific requirements.

Premium Affordability

Consider the affordability of the premium payments associated with the ULHP. Assess your budget and financial capabilities to determine whether you can comfortably afford the premium payments over the long term. Strike a balance between premium affordability and desired coverage levels to ensure the sustainability of your policy.

Flexibility and Options

Look for ULHIPs that offer flexibility and customization options to tailor the plan according to your changing needs and preferences. Check if the plan allows for adjustments in coverage levels, investment allocations, premium payments, and fund switching. Flexibility ensures that your ULHP remains relevant and adaptable to your evolving circumstances.

Additional Benefits and Riders

Explore the availability of additional benefits and riders that can enhance the value of your ULHP. Consider rider options such as critical illness cover, hospital cash benefits, accidental death benefits, and waiver of premium riders. Assess the relevance of these riders based on your individual requirements and budget constraints.

Customer Service and Support

Assess the quality of customer service and support provided by the insurance company. Evaluate factors such as responsiveness, accessibility, and transparency in communication channels. Choose an insurer that offers prompt and reliable customer support to address your queries, concerns, and service requests effectively.

Performance Track Record

Review the historical performance track record of the investment funds offered within the ULHP. Analyze factors such as fund returns, volatility, consistency, and fund manager expertise. Look for funds with a proven track record of delivering competitive returns while managing risk effectively over the long term.

Tax Implications

Understand the tax implications of investing in a unit-linked health insurance plan. Premiums paid towards health insurance are eligible for tax deductions under Section 80D of the Income Tax Act, subject to certain limits. Additionally, returns generated from the investment component of the plan may be subject to capital gains tax. Consider consulting with a tax advisor to optimize tax planning strategies.

Advantage of Unit Linked Health Plan (ULHP)

ULIP offers a range of advantages for individuals and families seeking comprehensive health protection and wealth accumulation. Let’s explore the distinct advantages of Unit Linked Health Plans:

Dual Benefits of Health Coverage and Investment Growth

Unit Linked Health Insurance plans provide the dual benefits of health insurance coverage and investment growth. A portion of the premium paid towards the ULHP is allocated towards health coverage, ensuring financial protection against medical expenses arising from illnesses, accidents, or hospitalization. Simultaneously, another portion of the premium is invested in market-linked funds, such as equity, debt, or balanced funds, offering the potential for wealth accumulation over time.

Tailored Investment Opportunities

One of the key advantages of Unit Linked Health Insurance plans is the flexibility to choose from a range of investment options based on individual risk appetite and financial goals. Policyholders can select the investment funds that best align with their investment preferences and objectives. Whether seeking long-term capital appreciation through equity funds or stability through debt funds, Unit Linked Health Insurance plans offer tailored investment opportunities to suit diverse investor profiles.

Potential for Wealth Creation

By investing in Unit Linked Health Insurance plans, policyholders have the opportunity to harness the potential of equity markets and benefit from long-term wealth creation. The power of compounding amplifies investment returns over time, allowing for significant wealth accumulation, especially when held for extended periods. Unit Linked Health Insurance plans provide a systematic and disciplined approach to building a financial corpus while simultaneously safeguarding against unforeseen medical expenses.

Flexibility and Customization

Unit Linked Health Insurance plans offer flexibility and customization features that cater to the evolving needs and preferences of policyholders. These plans typically include options for top-up premiums, partial withdrawals, and fund switching, allowing policyholders to adapt their coverage and investment strategy as per changing life circumstances. The flexibility to adjust the plan ensures that it remains relevant and aligned with the policyholder’s financial goals and risk tolerance.

Disadvantages of Unit Linked Health Insurance Plan (ULHP)

Unit Linked Health Insurance plans, which integrate health insurance coverage with investment opportunities, present certain challenges and considerations for policyholders. Let’s explore some of the disadvantages of Unit Linked Health Plans:

Market-linked Risks

One of the primary drawbacks of Unit Linked Health Insurance plans is the exposure to market-linked risks. Since a portion of the premium is invested in market-linked funds, such as equity or debt, the investment returns are subject to market fluctuations and volatility. Adverse movements in the financial markets can impact the value of the investment component, potentially leading to fluctuations in the fund value and returns.

Investment Performance Uncertainty

The performance of Unit Linked Health Insurance plans is contingent upon the performance of the underlying investment funds. Policyholders bear the risk of investment performance uncertainty, as the returns generated from the investment component are not guaranteed. Factors such as economic conditions, market trends, and fund management decisions can influence the investment performance, leading to variability in returns over time.

Fees and Charges

Unit Linked Health Insurance plans often entail various fees and charges, which can erode the overall returns and impact the net investment value. These charges may include premium allocation charges, policy administration charges, fund management fees, and mortality charges. Policyholders should carefully assess the fee structure of Unit Linked Health Insurance plans and consider the impact of charges on the long-term returns before investing.

Complexity

Unit Linked Health Insurance plans can be complex financial products, particularly for individuals who may not have a thorough understanding of insurance and investment concepts. The integration of health insurance coverage with investment opportunities adds a layer of complexity to Unit Linked Health Insurance plans, requiring policyholders to navigate through different aspects, such as fund selection, asset allocation, and risk management. Policyholders should seek clarity and guidance to make informed decisions regarding Unit Linked Health Insurance plans.

Who Should Invest in a Unit-Linked Health Plan?

While Unit Linked Health Insurance plans offer a range of benefits, they may not be suitable for everyone. Let us explore the types of individuals who could benefit from investing in Unit Linked Health Insurance plans:

Individuals Seeking Comprehensive Health Coverage

Unit Linked Health Insurance plans are an attractive option for individuals looking for comprehensive health insurance coverage. These plans offer financial protection against various medical expenses, including hospitalization, surgeries, treatments, and diagnostic tests. For individuals who prioritize having extensive health coverage for themselves and their families, a ULHP can provide peace of mind and security during medical emergencies.

Long-term Investors

Investors with a long-term investment horizon find Unit Linked Health Insurance plans appealing. These plans offer the potential for higher returns over the long term as they invest a portion of the premiums in various funds such as equity, debt, or balanced funds. By staying invested for an extended period, investors can capitalize on the power of compounding and market growth, potentially building a substantial corpus for future financial goals.

Those Comfortable with Market Risk

Unit Linked Health Insurance plans are subject to market risks, as the investment component is linked to the performance of the capital markets. Individuals comfortable with market volatility and fluctuations may consider investing in Unit Linked Health Insurance plans. While market risks exist, they also offer the potential for higher returns compared to traditional insurance plans. Investors willing to tolerate market risk in exchange for potential growth opportunities may find Unit Linked Health Insurance plans suitable for their investment strategy.

Individuals Seeking Flexibility

Flexibility is a key feature of Unit Linked Health Insurance plans, making them suitable for individuals who value customization and adaptability in their financial products. Unit Linked Health Insurance plans offer flexibility in terms of choosing the sum insured, selecting investment funds, adjusting premium payments, and switching between funds. This flexibility allows investors to tailor their Unit Linked Health Insurance plans based on changing needs, financial goals, and risk preferences, ensuring that the plan remains relevant and effective over time.

Conclusion

Unit Linked Health Insurance plans offer a dynamic and comprehensive approach to health insurance, combining financial protection with investment potential. With the potential for higher returns, tax benefits, and customization options, ULHIPs present a compelling option for those seeking comprehensive health coverage and wealth creation opportunities. However, it is crucial to evaluate the features, benefits, and risks carefully before investing in a ULHIP.

FAQs on Unit-Linked Health Insurance Plan


1

Is ULIP tax-free in India?

No, ULIPs (Unit Linked Insurance Plans) are not entirely tax-free in India. While the premiums paid towards ULIPs are eligible for tax deductions under Section 80C of the Income Tax Act, 1961, the maturity proceeds and withdrawals from ULIPs are subject to tax implications depending on the prevailing tax laws.



2

How does a Unit Linked Health Insurance plans plan differ from traditional health insurance policies?

Unlike traditional health insurance policies that offer only financial coverage for medical expenses, Unit Linked Health Insurance plans combine health coverage with investment components. Policyholders can invest a portion of their premiums in various funds, providing the potential for wealth accumulation over time in addition to health coverage.



3

Can I customize the coverage and benefits of a Unit Linked Health Insurance plans plan?

Yes, Unit Linked Health Insurance plans typically offer flexibility and customization options. Policyholders can customize the coverage amount, choose investment funds based on risk preference, adjust premium payments, and add optional riders to enhance coverage according to their specific needs and preferences.



4

What happens to the ULIP if the policyholder passes away due to health-related reasons?

In the unfortunate event of the policyholder’s demise due to health-related reasons, the nominee or beneficiary nominated by the policyholder receives the death benefit from the ULIP. The death benefit includes the sum assured along with any accrued investment gains, providing financial support to the nominee.



5

Can I take a loan against the accumulated funds in the Unit Linked Health Insurance plans plan?

Yes, most Unit Linked Health Insurance plans offer the option to avail of loans against the accumulated funds. Policyholders can borrow a certain percentage of the fund value as a loan, which is typically subject to terms and conditions specified by the insurance company.



6

How does the Unit Linked Health Insurance plans plan help in achieving long-term financial goals while providing health coverage?

Unit Linked Health Insurance plans offer the dual benefit of health coverage and investment potential. By investing a portion of the premiums in various funds, policyholders can potentially build a corpus over the long term, which can be utilized to achieve financial goals such as retirement planning, children’s education, or purchasing a home, while ensuring comprehensive health coverage.



7

Are there any restrictions on using the funds from a Unit Linked Health Insurance plans plan for medical treatment?

There are typically no restrictions on using the funds from a Unit Linked Health Insurance plans plan for medical treatment. Policyholders have the flexibility to utilize the accumulated funds to cover medical expenses, hospitalization costs, surgeries, treatments, and other healthcare-related needs as per their requirements.

- 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

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

Kotak e-Invest

Download Brochure

Features

  • Return of Mortality Charges*$
  • Enhanced Protection
  • Multiple Plan Options
  • Zero Premium Allocation Charges
  • Tax Savings^

Ref. No. KLI/22-23/E-BB/521

T&C

Invest in Your Future