What is ULIP plan and How Can it Help in Long-term Investments


If you’re on the lookout for reliable investment options that can enable you to generate wealth in the longer run, Unit Link Insurance Plans or ULIP can be an ideal choice for you. ULIPs are designed for those looking for long-term wealth creation investment opportunities and offer dual advantages of savings and protection.

With a Unit Linked Insurance Plan, you get the benefits of both investment and insurance. This means that a part of your premium amount goes towards your life insurance, and the other part gets invested in various funds in the market.

So, if you’re wondering how does ULIP work and whether you should opt for it or not, keep on reading.

What does ULIP mean, and how is it structured?

ULIP means Unit Linked Investment Plan and its structure is similar to that of a mutual fund. These plans pool investments from multiple investors and invest them in different funds according to individual preferences. These funds are perfect for you if you have specified investment objectives and wish to create wealth while also safeguarding your family’s future. Investing in ULIP means that you can invest in shares based on a single strategy or diversify your portfolio by investing across different market-linked funds.

How can ULIPs help in long term investments?

1. Lock-In Period

Investing in ULIP means locking in your funds for at least five years. This lock-in is excellent for instilling a habit of methodical investing. Usually, this lock-in period is calculated based on the policy date, and the premium needs to be paid either monthly or yearly or as a lumpsum amount. Since ULIP plans come with a long-term contract, a single ULIP is enough in your portfolio.

2. Flexibility

Unit Linked Insurance Plans are incredibly flexible. In fact, it is the only investment tool that offers you an option to switch funds in the middle of the policy tenure. In other words, investing in ULIP means having complete flexibility to move your investment amount (fully or partially) from one fund to the other. You can choose to make three to four switches in a year without any added cost. This allows you to ensure that your money is invested in the best possible funds and you’re able to make optimal profits. This is what is ULIP policies are known for.

3. Better Returns

There’s no doubt in the fact that ULIP means better returns. This is another reason that makes ULIP one of the best options for long-term investments. ULIPs have great potential as they distribute your money across different asset classes. In addition, ULIP plans also allow you to opt for a new fund every year based on its performance in the market.

4. Tax Benefits

Unit Linked Insurance Plans also give you tax benefits according to Section 80C of the Income Tax Act, 1961. This factor makes Unit Linked Insurance Plans a highly lucrative long-term investment option as you get tax benefits every year until the end of the policy term. However, one must note that tax laws are subject to change.

5. Great for First Time Investors

Unit Linked Insurance Plans are simple and straightforward. This is what makes these plans great for first time investors. Moreover, their flexibility and provision to switch stocks allows you to correct your mistakes before it gets too late, as ULIPs are subject to market risks.

These points explain the meaning of ULIP and make it clear that these plans are exceptional for long term investment. However, it is important to know how ULIP works and its technical details before choosing the right plan for yourself.


*Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time
The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.

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