How To Choose The Best ULIP Plans In India?

Choosing an ideal ULIP Plan for yourself is a pretty big task as there are many plans available in the market now. Read and analyse all the policies terms, conditions and benefits online so that you can choose the best one for yourself.

Analysis Of Personal Investment Goals

Understand your investment goals. In some cases, you may need to avail life insurance cover immediately after starting a career. On the other hand, if you want to use your post-retirement corpus for retirement income by socking away a lot of money every month, ULIP cannot substitute your investments in debt funds or even equity MFs.

Best ULIP Plans in India

Decide Insurance Objectives

If you're planning to buy ULIP for spreading risk and getting regular returns, then compare the benefits of debt MFs or equity MFs. Debt MFs helps you to diversify your portfolio by providing income opportunities regularly. They provide tax-free income by way of dividends and capital gains also.

Decide Investment Goals

Investing in ULIP's is not suitable if you want to save tax. Also, most of these policies are not suitable for short-term requirements like a child's higher education or marriage.

Examine The Claim Settlement Ratio

The best way to judge a company's track record is by assessing its claim ratio. If the ratio is high, policyholders are receiving their claim on time while insurers are paying up promptly. If the ratio is low, you must exercise more caution before investing your hard-earned money in such plans.

Understand Charges And Expenses

Before choosing one, compare the initial charges, ongoing expenses, and fund management fees charged by different life insurers. This will help you save costs in the long run.

Look For Online Reviews

Many people have shared their experiences with ULIP s on discussion forums. You can refer to these reviews when making a decision

Compare ULIP

There are a handful of charges that you need to keep in mind before you choose ULIP.

Read Product Disclosure Statement

Investors need to understand what they are getting into when buying life or health insurance products. The PDS provides all the necessary details about policies, charges, fees and other related information. Read it carefully before choosing any plan.

Policy Tenure Flexibility

The company needs to offer a flexible tenure policy. This will enable you to exit from the plan if you have other investment options for capital appreciation or consider it as a permanent solution.

Be Well-Versed With The Features And Benefits Of A ULIP Plan

A ULIP plan offers a unique combination of insurance coverage and saving opportunities. In case of death or disability, you get guaranteed protection while the returns from these policies are subject to market risks. The premiums can be invested in debt, equity or a combination of both, depending on your risk potential.

Investment And Insurance Benefits

The best thing about having a ULIP Plan is that you get Insurance cover and the freedom to invest the leftover premium in market linked investments like mutual funds. So if you are not sure how your money should be invested,, this plan helps you out! You can easily use your money whenever you want because of the free access feature!

Do Some Research About Each Plan

When you start looking for ULIP plans, check different insurance companies and then compare them to come up with the best option. This will help you to choose the plan which is perfect for you! It's also a great idea to read reviews online because people who have invested in this product before will be able to tell you which ones are worth investing in and which ones are not.

Check The Flexibility Of This Product

Flexibility is very important if you want your investments to grow over time! If the returns are fantastic, there could be some errors in calculations, which should ring alarm bells in your head! You must also be aware of the plan's performance history, especially if their past returns were too bad or good.

Choose The One According To Your Needs

If you want protection for your family, make sure that the premiums will be paid every year no matter what happens! If you want money for your child's education or wedding, ensure that this plan will cover the premium payment whatever happens to your health.

Understand Different Charges Levied

In India, ULIP works on a mutual fund model. Your premium is split into two parts - the first one goes to the insurer as pure protection, and the second part is invested in different kinds of funds offered by insurers. If you switch from equity to debt or vice versa, there will be some charges levied on your policy again! You can also say that these charges are similar to switching shares of a stock trading account with a brokerage amount!

Withdrawal Benefits

Apart from these charges, there are a few other ones, which you should note! These include withdrawal benefits. If you want to withdraw any money before the maturity period, you will have to pay a certain percentage of the overall premium for this privilege!

Solvency Ratio

It is somewhat like your overall net worth. If the number is too low, you'll need to increase the premiums to cover this loss and vice versa! This ratio determines whether an insurance company will be able to pay its claims or not! Therefore, it's better to invest in a plan with a good solvency ratio!

How ULIP Work?

To understand the working of these plans, here's an example:

Let's say you are 25 years old today. You would like to buy a term insurance cover of Rs 50 lakhs with the sum assured payable on your death. Now you also want to save money for your future, so you opt for a ULIP plan which has ten-year tenure. Let us assume there is no bonus in the first year and it is 20 per cent for the ten years.

You pay a premium of Rs 1,000 per month for 10 years. Now let us calculate how much your life insurer would have paid you at the end of the term: Rs 5,00,000 to your nominee or beneficiary on your death - this is called the Sum Assured. In addition, over ten years, you would also have received an additional sum as returns from both units linked savings and protection plans which will be more than your premiums paid. So you see, a ULIP plan is a win-win situation for you!

In simple words, this is how it works: You pay money to the insurance company, and in return, they give you some units. As per the terms of your policy, the number of units depends on your age; sum assured and tenure of the investment plan. The value of these units changes from time to time, depending on the market conditions. You can redeem these units anytime or just a few months before your maturity period as per the agreement.

Unit linked plans is a great way to protect your family in the event of an unfortunate demise. One share of the premium goes towards ensuring that you have life cover. At the same time, another portion is invested into various types of fund options, which can be customised based on what investors want - whether they're looking for wealth creation or risk-taking behaviour!

Benefits Of ULIP (Unit Linked Insurance Plan)

The best ULIP plan provides several advantages. Some of the critical ones are explained in detail below:

  • Life Protection, Savings,And Investment

    You can take life insurance cover for yourself or your dependents through ULIP plans. You also get access to tax benefits on the premium you pay. Secondly, through the ULIP plan, you can invest your funds in equity and debt markets within certain limits as per the tax benefit allowed under Section 80C of the Income Tax Act 1961

  • Market-linked Returns

    ULIP allow the policyholder to invest in equity and debt markets. This has led to high market-linked returns for investors over the past 5 - 10 years.

  • Life Protection, Savings, And Investment

    You can take life insurance cover for yourself or your dependents through ULIP plans. You also get access to tax benefits on the premium you pay. Secondly, through the ULIP plan, you can invest your funds in equity and debt markets within certain limits as per the tax benefit allowed under Section 80C of the Income Tax Act 1961

  • Investment And Insurance Benefits

    You can avail investment and insurance benefits through a single policy. The insurer invests your money in the stock market while you enjoy tax benefits on premiums paid and maturity benefits after certain years.

  • Long-Term Investment Benefits

    The ULIP policy can be continued for up to 30 years (in some cases, even longer), making it suitable for long-term investment.

  • Multiple Investments And Insurance Benefits

    You can use your ULIP policy money to make multiple investments like buying a car or taking a higher education loan. If you redeem your fund under the redraw facility, you can use the sum to take care of your child's marriage or retirement financing.

  • Withdrawal Benefits

    You have the flexibility to withdraw up to 40% of your ULIP fund from time to time. However, you can access 80% of the fund value under certain circumstances only after 5 years from the date of commencement of the policy.

  • Death Benefits

    In case of death, a full insurance cover is given to the nominee under the plan. The original investment amount and accumulated returns are fully paid in cash to the beneficiary upon maturity or surrendering of policy. This benefit is not available in traditional plans.

  • Maturity Benefits

    The policy matures once the tenure of the plan expires. The maturity amount is paid to you instantly, or it can also be used for an extended period.

  • Surrender Benefits

    When a policyholder wants to surrender his insurance plan, he is entitled to the surrender value of his ULIP policy after fulfilling certain conditions. This benefit is not available in traditional plans.

  • Tax Break

    Upon the maturity of a ULIP, all premiums paid are deductible from income. In case, if an insurance coverage not commensurate with your investment, you can ensure that it is adjusted against the total corpus by making additional premium payments. The excess payment will be treated as income from other sources and taxed accordingly.

Income Tax Benefits On ULIP

To understand the working of these plans, here's an example:

ULIP provide a host of benefits for you and your family, including income tax exemption. The minimum Sum Assured or Death Benefit should be at least 10 times the annual premium; otherwise, these insurance plans come with some strings attached - namely that their taxes must also stay below the prescribed levels (10%).

The added benefits of the Unit Linked Insurance Plan are insurance and investment. It also offers an income tax exemption for a maximum of Rs 1.5 Lakh u/s 80C, which comes under the Income Tax Act, 1961.

The maturity benefit must be at least 10 times the annual premium, though, which could make it difficult for some people who want their money back after death or retirement. If this isn't met, those earnings won't count as part of your income under Indian law.

Rs 1.5 Lakh u/s

80 (C)

Tax Free Maturity

10 (10D)

How To Claim Tax On Unit Linked Insurance Plan?

The policyholder can enjoy tax exemption under the ULIP plan. Premium paid towards this investment and maturity proceeds are exempt from taxes under Section 80C and 10(10D) of India's Income Tax Act.

Key Features Of ULIP

ULIP combines the advantages of insurance and investment in a single financial instrument. No other investment instrument allows you to do so. With the protection of a life insurance coverage, ULIP can give you a financial cushion against life's uncertainties. ULIP plans have a built-in savings plan, where a part of the premium goes into a savings account that earns higher returns than a regular bank savings account.

  • Flexibility In premium payment : ULIP allow you to pay the premiums monthly, quarterly, or annually. You can go through different plans with different premium payment options from which you can suitably pick one that best suits your budget.
  • Funds for Crucial Milestones In Life : ULIP help you make financial provisions towards your child's education, marriage and other important life goals. This facility gives you the flexibility to choose an investment option that best meets your needs. You can easily switch your investment option from its existing one to another.
  • Protecting The Child's Future : ULIP can provide a coverage to your child against various risks, such as death from accident, critical illness and disability. In the unfortunate case of the parent's death, funds from ULIP can be used to pay off any liability that may arise from loans taken by the deceased.
  • Financial Assistance In Retirement :You can use your ULIP funds to meet any medical emergency or for retirement. ULIP provide regular pension and lump sum benefits, which can be paid on maturity, annually, monthly or quarterly basis, thus giving you the benefit of both - investment and protection.

Why To Invest In ULIP?

ULIP is suitable for people looking at long-term investments with the protection of life insurance, i.e., you can invest in ULIP if you are looking to invest money for 10 or more years. However, if you are in your 40s or early 50s and have a life cover of less than Rs.5 lakh, then this product would be ideal for you. Another criterion would be someone looking at making heavy investments in stocks since ULIP are not very suitable for short-term investments.

Higher Returns

ULIP are essentially different from the other products, as they offer you both insurance protection and investment. Compared to other traditional plans, ULIP have a higher risk-reward ratio. Since there is an element of stock market risk in these plans, the returns are more on the upside than traditional plans.

Avoid The Everyday Hassle Of Managing Stocks

ULIP are a combination of life insurance and mutual funds. The fund value is linked directly to the NAV of the underlying unit. If you need money, say for a medical emergency, there's no prerequisite that you sell your units from equity funds to get cash-in-hand. You can simply surrender the ULIP and take the money.

Multiple Fund Options To Choose From

ULIP today offers you a wide range of funds to choose from. Approx. 50+ fund houses with more than 500 ULIP options (called Funds). So, not only it is easy for investors to switch between plans, but the choice of funds also make it easier to navigate through your investment goals.


People these days want to know where their money is going and what return they are getting on their investments. ULIP directly link the prices of unit-linked insurance plans to market rates. So you get actual value for your money, and there's no opacity in how your money is invested.


If you decide to surrender your plan, the money is directly linked to market prices and not accounted as a long-term liability on the insurer's books. So the entire process of getting a claim approval should be prompt and hassle-free.

Low Surrender Charges

In case you decide to cancel your ULIP policy before the completion of three years, there's a minimum amount that you will have to pay. This is called a 'surrender charge' and varies from insurer to insurer. The idea of a surrender charge is to protect the insurer against any losses it may incur on account of premature withdrawals.

ULIP Checklist: Things One Should Care Before Investing In ULIP

Life Insurance is one of the most important investment products that an individual should opt to safeguard his / her family in case of an unfortunate eventuality. ULIP claims to be the most suitable choice for an individual looking for an extra source of financial security. Follow these simple steps to choose the right ULIP for a hassle-free process.

  • It is always advisable to have the prior knowledge about how the ULIP works. Moreover, the investment process will be easier for you if you are aware of the advantages and disadvantages.
  • It is always better to be aware of the expenses incurred at the time of entering or exiting a policy. However, if you have taken ULIP for an extended term, then it is suggested that you should not exit from the policy before its tenure.
  • The investors must keep their focus on their investment goals rather than be swayed by some luring feature of a unit-linked insurance plan. It would be good that the investor has prior knowledge about an investment goal and how it can be achieved.
  • Make sure to have a suitable mix of debt and equity investment to have a balanced portfolio, which will suit your financial goals. It is advised to go for a payment mode only after knowing the cash value accumulation of the policy.
  • Carefully examine how the fund has performed in the past 2 to 3 years while the benchmarks remain indices like BSE or Nifty. This will give a fair idea of the performance of the mutual fund.
  • Compare ULIP products of different insurance companies before finalising one. Multiple comparisons of the same will help you to understand which offers gives you the better features at competitive costs.
  • Investors can get in touch with their insurance advisor for any query regarding the policy. However, remember that it is only your money and not any intermediary's money.

Who Should Invest In ULIP?

ULIP may be described as a mixture of insurance and investment that combines life insurance with certain investment elements, giving you significant benefits in building your prosperity.

People With Varying Risk Appetites

ULIP is suitable for people who have a high-risk appetite. They are ready to take on the volatility of markets even if they may lose some of their investment in the short term. However, if you like to maintain stability in your investments, then ULIP are not suitable for you.

People With Medium To Long Term Investment Horizon

ULIP are most suitable for people who want to invest their money for a long period. The premium allocation costs and policy administration charges make this product less attractive for short term investors.

Hands-On Investors

ULIP are not for people who want to do all the investment themselves. The charges associated with ULIP make it suitable only for those who prefer having someone else who can manage their investments for them.

Investors Across Different Life Stages

ULIP are suitable for investors at all stages of their lives. The fund manager in the ULIP has the flexibility to choose the right mix of investments considering your age, risk profile and investment horizon. For example, when you are young, the fund manager may invest in an equity-linked instrument, whereas they will take a lower equity exposure when you are near retirement.

Lock-In Period

ULIP are designed to offer two benefits Protection against unforeseen life events and financial gains. For this reason, most of the plans require you to maintain your policy for a minimum number of years before you can begin withdrawing funds from it. This protects your hard-earned money from being withdrawn at short notice when you might need it.

Offers Higher Returns Among Other Investment Options

ULIP offer a higher rate of returns to your savings against other traditional investment options such as fixed deposits and saving accounts. The longer the period you choose, the better the returns can be expected from your ULIP policy. You can also decide upon what kind of risk profile you wish to maintain based on this product's features.

Flexibility Of Investment

ULIP plans offer you the flexibility to make changes in your investment according to your needs. You can choose to take out part of your investments when required and then return them once the purpose is solved. .

Dual Advantage Of Insurance And Investment

ULIP plans give you the dual advantage of insurance protection and investment for your long-term goals. It is designed to cover your life during all stages, guaranteeing you protection against unforeseen life events and growing your money efficiently with financial gains.

Types of ULIP Plans

Based on the purpose they serve, ULIP plans can be divided into the following types-

Classification By Purpose

A ULIP Plan Can Be Used For These Four Purposes-
  • ULIP For Retirement

    One of the major reasons you buy a ULIP plan is to accumulate money for retirement. When you start a ULIP, your basic motive should be to invest in it for a longer-term to build a corpus that can meet your future financial needs.

  • ULIP For Children's Education

    The purpose of this ULIP plan is to invest for the short term. The aim should be to generate high returns within a short period.

  • ULIP For Children's Education

    One reason why parents opt for ULIP plans is the education needs of their children. Such plans can serve as a platform to accumulate money that can be used for your children's education.

  • ULIP For Health Benefits

    ULIP plans are beneficial in providing medical insurance cover. Various ULIP plans offer health benefits to policyholders.

Classification By Death Benefits

ULIP Are Divided Into Two Broad Categories Depending On The Death Benefit


ULIP Plans

Type 1 ULIP plans are popular with senior citizens and retirees by ensuring complete financial protection. These ULIP plans offer guaranteed death benefits. The policyholder does not pay any additional premium for this benefit, nor can he/she opt-out of it.


ULIP Plans

Under this ULIP policy, the company will not bear the risk. In case of the policyholder's death, they will pay a pre-determined lump sum to the nominee/ legal heir. However, from the company's point of view, there is no guarantee involved since it is a pure term plan. Hence these plans are preferred by people who want to derive protection against life contingencies such as hospitalisation, etc. (but not against death)

What Are ULIP Funds And What Type Of Funds Do ULIP Plans Offer?

ULIP Funds are usually linked to equity or debt market indices. The funds are categorised into various investment schemes, each designed to suit investor's risk profiles. Common types of funds with their characteristics are given below:

Cash Funds

Liquidity is one of the benefits offered by investing in cash funds. These funds invest in liquid debt instruments that are low risk. There are no capital appreciations or loss potential with this type of fund. The main advantage of investing in it is return on maturity, varies between 6% to 11%. This kind of fund is ideal for investors who want short term access to their capital.

Balanced Funds

These funds are invested both in equity and debt instruments. The debt portion of the fund may be invested in cash instruments or fixed income securities, depending on investor's risk appetite. This fund offers no performance advantage, but it provides diversification across the asset like equities and debt. High exposure to the equity market makes it an ideal option for long-term investment, but it can also be used for short term goals.

Debt Funds

These funds are suitable for investors who have a low-risk appetite. They invest in fixed income securities, which are safer than equities. Interest rates offered by debt instruments determine returns on this fund type. The risk of the capital loss is also associated with it, but chances are more if the interest rates are falling rather than rising.

Hybrid Funds

Hybrid funds can be used for long term goals or medium-term needs. These funds invest in both equity and debt instruments. They are generally balanced funds with asset allocation between 60%-80%. While returns on this fund type are higher than debt funds, they are also volatile.

Equity Funds

Hybrid funds can be used for long term goals or medium-term needs. These funds invest in both equity and debt instruments. They are generally balanced funds with asset allocation between 60%-80%. While returns on this fund type are higher than debt funds, they are also volatile.

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