What are ULIP Plans? Meaning & Benefits

ULIP plans provides you with a suitable investment and the facilities of insurance. The ULIP scheme insurance company has included some such programs. Who work towards achieving your financial goals?

There are many ULIP plans available in today’s time, which you can do according to your need, according to your destination, as you feel comfortable. In today’s time, people are looking for different ways to invest.

If someone is investing in mutual funds, someone else is investing in the stock market, or many people are investing in insurance, you can only get insurance if ULIP plans are mentioned these days.

Not only this, but you also get the benefit of your investment in it. Today, through this article, we will give you information about the advantages of ULIP plans, disadvantages of ULIP plans, everything related to ULIP plans…

What is the ULIP plan?

ULIP plan is available in India for the first time UTI introduced ULIP plan. The complete form of the ULIP plan is “Unit Linked Insurance Plan.” There are two terms in ULIP. The first unit link you can invest mainly in this.

You are treated like a mutual fund investment in this, and a unit is given in it. The price of that unit is decided based on NAV. The investment made by you can also be an investment in the stock market and brand.

If we talk about the second term, it is an insurance plan. In this, out of the amount of investment you make, some amount is withdrawn for your insurance. This investment gives the security of your life mind. In this way, the life insurance facility is also provided to the founder of the investment in the unit plan.

Key features of ULIP plan

There are some main features of the ULIP plan: follows.

1. ULIP plan provides you with a suitable investment and the convenience of your life insurance.

2. The premium of ULIP is used for tax exemption, and its maturity is tax-free, and the fund switch facility is also given in it.

3. ULIP plan is also helpful in achieving your long-term goals like building a new house, educating children, buying a car, etc.

4. Apart from this, the ULIP plan also gives exposure to the stock market of your investment.

How ULIP plan works?

Suppose you invest in a ULIP plan, and during that, the premium comes in the ULIP plan after deducting all the ULIP charges and the money related to your insurance. In that case, the remaining amount is invested under this plan. Units are allocated based on the current NAV on the amount.

For example, suppose the premium of your ULIP is ₹ 10000. Out of this, ₹ 500 unit charges have been deducted, and the rest of ₹ 9500 has been invested in your fund current NAV is Rs 95. You will get 9500/95 = 100 units under this ULIP plan.

Investing in ULIPs

Your premium amount can be invested in 4 ways in a ULIP plan.

1. Equity Funds – If you can take more risk than the investment purpose, you can lose your equity investment. The real money for investing in equity is invested in the stock market, and equity funds work on the formula of high risk and high return.

 If you are a young investor, you can invest in equity funds, and this option can be good for you.

2. Dept Funds – In ULIP plans, if you want to invest in your premium debt funds, there is also an option to invest here. Depth fund taxes are commensurate with the interest rate, so the risk potential is shallow. Due to low risk, it also has less ability to give returns, and its return is less than equity. Older investors can opt for a depth fund in a ULIP plan.

3. Balanced Funds – Combination of Equity Funds and Debt Funds, i.e., both form a form of Balance Funds, in which investors can also build a balanced portfolio by taking exposure of both.

4. cash funds – In this type of fund, you can also invest in money market tools such as market funds, bank accounts, cash deposits, etc., which reduce your risk, because the risk is less, so the returns do not have to be paid high.

Lock-in period in ULIP

Many ULIP policies come under a lock-in period of 5 years, all of them used to have a period of 3 years before 2010, but IRDA has increased the lock-in period to 5 years from 2010.

Benefits of ULIP Plan

ULIP plan offers the perfect type of benefits. Mutual fund attracts capital gains tax, but no capital gains tax has to be paid in ULIP. Let us know about the benefits of the ULIP plan.

1. Premium paid in ULIP is eligible for exemption under section 80C of Income Tax, in which you can get investment exemption up to Rs.1.5 lakh.

2. The unit amount received on maturity is entirely text-free under section 10D of Income Tax. Still, to avail of the exemption on maturity, the amount of premium you need to leave for the time being is 10% less. Apart from this, the two benefits are also available in the ULIP plan.

3. In the Budget 2021 passed in the Parliament, the Finance Minister has brought an amendment to bring tax parity. Premiums paid more than Rs 250 lakh in a financial year will be taxable on maturity, but there are no clear guidelines if it changes.

4. Funds from ULIPs can be invested in Markets Limited, so if the market is in your favor, then you can get an opportunity to generate exceptional returns.

5. Life insurance in ULIPs offers life cover along with many features. The units can be primarily extended for five years or even more years. You need a long-term commitment to pay the premium like an insurance plan which is well paid on maturity of the policy.

6. ULIPs also give you the option to switch between different types of investment plans according to your needs.

7. Benefits from ULIPs are tax-free under Section 80C and 10D.

Risk and Return in ULIP plans

In ULIP, your deposit is invested in the stock market and board, so your total return depends on your performance. The stock market can be volatile at times, so ULIPs are prone to risk.

ULIP plans charges

The investor in the ULIP plan collects different types of charges.

1. Fund Management Charges – Fund management charges are levied by the insurance companies for managing the Elephant, which you can understand like the mutual fund’s expense ratio. This charge is taken up to a maximum of 1.35 percent of the fund value per year.

2. Fund Switch Charges – Some companies provide the facility of free fund switch, then some companies levy extra charges for the button. It depends on the fund to fund.

3. Premium Allocation Charges – This charge is on the front load charges deducted from the investor’s premium.

4. Partial Allocation Charges – Some ULIP plans also offer the facility of unlimited withdrawal, while some charge the investor for this.

5. Mortality Charges – ULIPs collect motility charges for the account holder for providing insurance cover on his death by the insurer. This charge is higher for individuals of

6. Policy Administration Charge – This charge is deducted every month by reducing your few units as policy administration. This charge can also be at a fixed rate or removed as a percentage of your premium.

Shutting down the unit before the lock-in period

If you want to discontinue the ULIP policy before the lock-in period of the ULIP plan, i.e., before the end of 5 years, then your fund goes to the discontinuous fund. The amount deposited by the bank will be paid to you at the rate of 4% interest.

This rate of interest runs according to the guidelines of IRDA, and no change is made in it. The most crucial thing in this is that even if you close the ULIP plan before five years, you get this amount only after the end of 5 years.


Today we have given information about what is ULIP plan is through this post. I hope you have understood the complete details of the ULIP plan offered by us. You can ask by commenting on any other related to this, or you can connect to our website for any information.


What is a ULIP plan?

It is a life insurance plan only.

For how many years is a ULIP plan?

5 years

What are the types of charges prescribed under the ULIP plan?

6 Kinds

What is the life insurance claim received through ULIP?

Your life cover is ten times higher than the annual premium.

Where is the ULIP plan taken?

From a broker or directly from an insurance company.

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Rohit Mehta is an Indian Blogger-cum-Journalist, Author and Entrepreneur. He have been in digital marketing & IT sector for over 10 years, running his own digital agency, working for thousands of clients and projects.