What is the meaning of a ULIP?

Jan 04, 2018 | 2 years ago | Read Time: 3 minutes | By iKnowledge Team

ULIP (Unit Linked Insurance Plan) is a market-linked life insurance policy that offers investment and insurance benefits to you.

You must have heard about ULIPs while looking for an insurance plan. That’s because ULIPs have generated quite the buzz in the insurance market. But what are they, really? And does it really match its hype?

Let’s go one step at a time to answer your questions.

First things first: What are these ULIPs?

ULIP, also unit linked insurance plan, are a one-of-a-kind life insurance product because they help your money grow over time as well. That’s because ULIPs allow you to invest in the money and capital markets.

An introduction to the ULIP family

There are different types of ULIPs available in the insurance market. They are:

  • Retirement-planning ULIPs: Savings are accumulated over the years. At maturity, the policyholder gets the corpus to buy immediate annuity plans
  • Child-education ULIPs: These provide financial support for children’s education. The benefit of this plan is that your child receives the sum assured amount immediately in case of untimely demise. The future premiums are also waived in this case. Therefore, opting for this plan can help secure your child’s future in case you are not around.
  • Wealth-creation ULIPs: This helps create wealth with the aim to beat inflation. is one such plan that can help grow your wealth. That’s because 100% of the premium you pay is put in an investment vehicle.
  • Health-solution ULIPs: These health ULIPs are the perfect balance of insurance and investment. Here a part of your premium (once charges are deducted) gets invested in the market to create your fund value.

What is the buzz all about?

Here is a detailed rundown on the benefits of ULIPs:

  • Market-linked returns: ULIP returns are linked to the stock market. They have the potential to provide policyholders with high returns. Just to give you a perspective, conventional insurance plans do not have this benefit. They insure your life with large covers but do not give you a direct way of growing your money. Therefore, ULIPs can provide savings, investment and life coverage under a single plan.
  • Helps save tax: Investors get tax benefits on the premium as well as the maturity amount
  • Flexibility:
    • Choice of fund option: You can choose from aggressive, balanced and conservative ULIPs.
    • A switch between funds: You can switch between funds to match your financial needs
    • Change in life cover: You can increase your sum assured during the term plan
    • Change in premium amount: You can pay a top-up amount on your premium at any time
    • Riders: You can customise their ULIPs by opting for riders. An example would be the accident- and disability-benefit rider.
  • Transparency:
    • Sales-benefit illustration: This can help you understand how your premiums are used and the charges you should pay. It also shows the possible growth of your funds based on your chosen premium and sum assured.
    • Free-look period: You have a 15-day free-look period. You can return their policy within this time frame if you are unhappy with it
    • Portfolio tracking: You can track how your investment is faring. This way, you can make changes to make the most of your investment
    • Regular updates: Insurance companies also send regular updates on the performance of your funds.

Bottom line

It is a myth that only an investor open to risks invests in ULIPs. Even conservative investors can gain from ULIPs linked to debt funds. Research well and choose a ULIP that suits your financial portfolio and risk profile. Aegon Life’s iInvest and iMaximize insurance plans are two such examples of ULIPs. In addition to this, AegonLife also offers child plans and saving plans for you.

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1. Top Financial Frauds in India
2. ULIP Tax Benefits
3. Section 80C, 80CCC & 80CCD Deduction
4. Best IB Schools in India
5. Taxation Structure in India

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