How to Choose The Right ULIP Plan In 5 Easy Steps

Unit Linked Insurance Plans or ULIPs as known popularly, are one of the most reliable market-linked financial instruments that offer investors dual benefits.  Unlike other insurance policies, Unit Linked Insurance Plans offer a combination of both investment and insurance to their customers. This article will highlight how the Unit Linked Insurance Plans work and how one can choose the right ULIP plan that will offer maximum returns.

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What are ULIPs?

ULIPs are a mix of investment and insurance. A ULIP enables plan holders to attain their objective of wealth creation through investing in equity funds or debt-based funds or both by their long-term goals. One of the popular investment tool, ULIPs help you achieve your life goals with systematic investments.

Key Features of ULIP

Let us look at the key features of ULIPs to have a better understanding



Instrument Type

Insurance coverage and investment returns benefit

Investment Mix

Funds can be invested in the debt and equity market or both

Tax Benefit

The tax benefit is offered under Section 80C and 10(10D) of the Income Tax Act

Switching Option

Free switching is available up to a specific number

Life Cover

The benefit of life cover to the family of the life assured

Lock-in Period

ULIP comes with a 5 year lock-in period

Investment Regulated By


Death Benefit

The death benefit is paid to the nominee of the policy in case of uncertain demise

Fund Management Charges

1.35% (May vary with insurer)

There are several Unit Linked Insurance Plans in India. It is important to choose the right plan that suits your needs and requirements so that you gain maximum profit in the future.

Here are 5 easy steps that can help you choose the right Unit Linked Insurance Plan

  1. Check The Life Protection Cover

    Unit Linked Insurance Plan is a combination of investment and insurance. Sometimes, while considering the investment return part, insurance coverage is neglected.

    While purchasing a ULIP policy it is important to make sure that the sum assured covers enough to protect your family at the time of financial crisis even if you are not there to look after them. Hence, life protection cover plays an important part as the investment coverage when it comes to Unit Linked Insurance Plans.

  2. Choose The Plan with Higher Fund Option

    The primary focus while purchasing a ULIP policy is to make sure that it offers diverse fund options to the insured. A limited number of market-related funds seize the chances of better ULIP performance.

    While investing in ULIPs, one can choose between debt funds, equity funds, or a mix of both according to their requirements. Equity funds, on one hand, offer higher growth potential for the long term, Debt funds on the other hand helps you save your wealth.

    You need to keep a balance between these funds as per your requirements.

  3. Select a Plan Based On Your Personal Investment Goals

    As an investor, if you want to meet your desired financial goals in the future, it is important to make smart investment decisions at the present. Be it your post-retirement life, your child’s future education, your dream goals, your family’s future, or any other future financial requirements, it is important to outline your personal investment goals carefully.

    Once you identify your future financial needs it becomes easy to choose the right Unit Linked Investment Plan that matches your life goals.

  4. Know Your Risk-Taking Appetite

    Risk-taking appetite is an essential factor not just while buying a policy but in general life as well. When it comes to purchasing a Unit Linked Insurance Plan,

    • Equity funds are associated with higher risks while
    • Debt funds are associated with lower risk compared to Equity funds

    The main factors determining your risk-taking appetite are:

    • Age
    • Income
    • Financial corpus
    • Several dependents, etc.

    Being aware of your condition keeping in mind the abovementioned factors will help in making a better decision while choosing the right ULIP plan.

  5. Check ULIP Policy Charges

    In Unit Linked Insurance Plan (ULIP), the entire amount is paid as a premium, and nothing is used to purchase units. The insurance company, as per their policies, deducts certain charges before allotting their units. The remaining premium amount is allocated in different asset classes such as debt, equity, or both.

    Even though the charges against ULIPs may vary from company to company, the standard charges that you have to look out for, include the following:

    • Fund Management Charges
    • Premium Allocation Charges
    • Policy Administration Charges
    • Surrender or Discontinuance Charges
    • Partial Withdrawal Charges
    • Mortality Charges
    • Switching Charges
    • Guarantee Charges
    • Rider Charges

Who Should Buy ULIP?

  • People who cannot separate their investment and insurance needs and are willing to keep them together rather than buying and handling different schemes should go for ULIPs. 
  • People who are looking for long-term investments, say for around 15-20 years, should go for ULIPs.

If a person is looking forward to investing in these 2 abovementioned conditions, then they should undoubtedly go for Unit Linked Investment Plans.

Wrapping It Up

Purchasing a Unit Linked Investment Plan should be a well-thought decision. If you have bought a Unit Linked Investment plan, it is advisable not to opt out of it at an early stage.

Keeping all the factors affecting ULIPs in mind, one should invest in the right plan that gives maximum profits in the future.

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*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^Tax benefit are for Investments made up to Rs.2.5 L/ yr.
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