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Unit Linked Insurance Plans(ULIP)

Unit Linked Insurance Plans(ULIP)

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Unit Linked Insurance Plan (ULIP)

There are several types of life insurance plans you can choose from based on your financial goals and convenience. Some plans offer only a life cover while some come with investment cum insurance components.


ULIP, short for a Unit Linked Insurance Plan is one such insurance cum investment plans. The plan allows you to invest for your long-term financial goals, while also providing the protection of a life cover. Read further to understand the various aspects of a ULIP policy

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What is a ULIP (Unit Linked Insurance Plan)?

The meaning of ULIP is quite simple: it is a market-linked plan wherein one can avail life insurance coverage and also invest in different funds such as equity, debt, or balanced funds based on your risk appetite and financial goals. Just like traditional life insurance, you are required to pay premiums under a ULIP. However, a part of this premium goes towards providing life cover, while the rest is invested in funds of your choice, helping you build wealth over the long term. When your ULIP plan matures, you receive the fund value, which consists of the amount you invested plus the returns earned over time. This makes ULIPs a dual-benefit product — offering both protection and investment under a single plan. In the unfortunate event of your demise during the policy term, your nominee will receive the death benefit, which could be either the fund value or a pre-decided sum assured, depending on the policy terms.

Why Should One Consider Investing in ULIPs?

A ULIP plan can offer a multitude of benefits. Here are some reasons why you may want to invest in a ULIP

Market-linked Returns

ULIPs provide market-linked returns. The longer you stay invested, the probability of earning expected returns is high too, subject to market performance.

Multiple Investment Options

A ULIP investment portfolio offers a variety of fund options from aggressive equity to conservative debt or hybrid funds.

Flexibility

ULIPs offer the flexibility to switch between different funds based on changing goals and risk appetite, allowing better control over your portfolio.

Tax Benefits

ULIP premiums may be deductible under Section 80C, and the maturity or death benefit may be tax-free under Section 10(10D) of the Income Tax Act, 1961.

Liquidity

In case of emergencies, the partial withdrawal feature of ULIPs helps you access funds to meet your financial needs.

For Whom Is A ULIP Investment Suitable For?
ULIPs can be an investment option for many, depending on their financial goals and risk appetite. Here are several types of people who may benefit from investing in a ULIP –
Risk Icon

People with Varying Risk Appetites

An investment in a ULIP may offer a broad range of market-linked investment funds...

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Investment Icon

People with a Long-Term Investment Horizon

The returns of a ULIP may be optimal for people with a long-term horizon...

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Hands On Icon

Hands-On Investors

ULIPs may be suitable for investors wanting to play an active role in their investments...

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Life Stages Icon

Investors Across Life Stages

An investment in a ULIP may be customised to cater to people in different life stages...

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How ULIP Works?

Here's how it works in detail:

  • The premium you pay is used to meet two key financial goals, life insurance and investment.
  • Your money is invested in market-linked funds that you get to choose.
  • The value of each unit is referred to as the NAV. It can reflect any increase or decrease in the value of the underlying assets.
  • If you make partial withdrawals, the corresponding number of units are sold.
  • At the time of maturity, you may receive the total fund value.
  • In case of your demise, your nominee may receive the death benefit

Steps For Buying A ULIP Online

Follow these steps to acquire a ULIP online seamlessly:

  • Go to the official website of the insurer offering ULIP products.
  • Browse through the available ULIP products and select the one aligning with your goals.
  • Determine the desired policy duration and select the premium payment amount.
  • Proceed to the payment section of the website.
  • Choose payment method: net banking, credit card, debit card, or wallet.
  • Make payment and confirm the purchase.
  • Enjoy the benefits of your Unit Linked Insurance Plan.

You can also use a ULIP calculator to estimate your investment needs.

Features Of ULIPs

A ULIP may come with several distinct features that set them apart from other types of life insurance plans, such as:

Dual Benefits: Investment and Insurance in One

The primary purpose of a ULIP policy is to provide comprehensive life insurance coverage while enabling wealth appreciation...

ULIP Fund Switching: Flexibility in Managing Your Returns

One significant benefit of ULI is fund switching, allowing policyholders to move their money between funds...

Partial Withdrawals: Meeting Liquidity Needs

ULIPs offer a partial withdrawal option for investors needing liquidity, unlike traditional life insurance plans...

Top-Up Investments: Increasing Your Investment Amount

ULIPs allow top-up contributions to increase your annual investment as your income or goals grow...

ULIP Lock-in Period: Building the Habit of Consistent Investing

ULIPs have a lock-in period of 5 years that encourages long-term savings and investment discipline...

Benefits Of ULIP

A ULIP may offer a host of benefits that go beyond traditional insurance or investment plans. They may include:

  • Maturity Benefit: Unlocking Your Accumulated Fund Value

    Upon reaching the maturity of your ULIP plan, a rewarding benefit may await. You may become eligible to receive an amount equal to the accumulated fund value...

  • Death Benefit: Protection for Your Loved Ones

    In the unfortunate event of an untimely demise, your family may receive the ULIP death benefit. This benefit is usually unaffected by market changes...

  • Asset Allocation: Empowering You with Choice

    ULIPs allow allocation across different equity, debt, or hybrid funds. This helps align your investments with your risk appetite and goals...

  • Wealth Generation: Harnessing Market-Linked Growth

    ULIPs may offer better returns over the long term by linking your funds to market performance, though short-term volatility can exist...

  • Tax Benefits[1]

    ULIPs offer deductions under Section 80C and tax-free returns under Section 10(10D) of the Income Tax Act...

  • Stage 1: Entry Benefits – Avail Deductions on Premiums

    Premiums paid may be eligible for deduction from taxable income up to ₹1.5 lakhs under Section 80C...

  • Stage 2: Earnings Benefits – Tax-Free Growth

    Your returns grow tax-free as long as the funds remain invested. Tax is only applicable upon withdrawal or redemption...

  • Stage 3: Exit Advantage – Tax Treatment at Maturity and Demise

    Maturity/death benefits may be tax-exempt if premiums meet specified limits. Returns on equity funds above ₹1 lakh are taxed at 10%...

ULIP Charges

Familiarising yourself with the ULIP charges levied to cover expenses and risks may be crucial. It may give you a better understanding of when and why they are levied, enabling you to make an informed decision. Here is a list of major ULIP charges:

Charge Type Description
Fund Management Charges The money you invest in a ULIP is managed by expert fund managers. These professionals make investment decisions, monitor assets, and may aim to optimise returns. Hence, a fund management charge may be levied by the insurer to provide for this expertise.
Policy Administration Charges Managing ULIPs involves administrative tasks like paperwork and record keeping. To cover these expenses, insurance providers may deduct policy administration charges from your policy account.
Mortality Charges ULIPs include a life insurance component, providing a death benefit to the nominee in case of the insured person’s demise during the policy term. To account for this risk, insurers may levy mortality charges on ULIP. Some new-age ULIPs offer the Return of Mortality Charges (ROMC) benefit. If the policyholder survives the policy term, the initially levied mortality charges may be returned at maturity.
Premium Allocation Charges These charges may be deducted upfront as a percentage of the premium. They may account for initial expenses incurred by the insurer when issuing the ULIP, such as underwriting or distributor fees.
Policy Discontinuance Charges ULIPs typically have a lock-in period of five years. If you decide to surrender your ULIP before this period and discontinue payments, the insurance provider may levy discontinuance charges.
Partial Withdrawal Charges After the 5-year lock-in period, ULIPs may allow for partial withdrawals. Some plans may offer unlimited free withdrawals; others may have a limit. If you exceed the permitted number of free withdrawals, charges may apply.
Fund Switching Charges One unique feature of ULIPs is the ability to switch your investment between funds. Some insurers offer a few switches per year for free. Beyond that, charges may apply as per policy conditions.
Miscellaneous Charges Under this category, you may incur additional charges for changing your ULIP contract, such as adjusting the premium payment mode. These may vary based on the specific alteration.

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FAQs

What is the full form of ‘ULIP’?

‘ULIP’ stands for Unit Linked Insurance Plan. It can be considered a unique financial product combining the elements of life insurance and market-linked investments.

What Should You Keep in Mind While Investing in a ULIP?

Before investing in a ULIP, you may want to keep in mind the fund options of the plan, the charges levied, the solvency ratio, and the claim settlement ratio of the life insurance provider.

Are ULIPs Safe?

Yes, ULIPs are safe. If you are a risk averse individual, you may invest in predominantly low-risk funds like debt funds. Also, you may use premium redirection and fund switching to change your fund allocation for ensuring fund safety.

What is the maximum duration of the trial period or free look period of a ULIP?

The trial period or the free look period of a ULIP is typically 15 days from the date of receiving the policy document. In the case of electronic or online ULIPs, the free look period can be 30 days.

What is the best way to choose a ULIP?

Choosing a ULIP that fits your needs and requirements perfectly may be crucial to be able to satisfy your goals. You may want to compare several plans and choose an option that has fewer charges and has the fund options of your choice.

Why is medical insurance necessary for your health?

Medical insurance provides financial protection against unexpected medical expenses, ensuring access to quality healthcare without depleting your savings.

How many dependent members can I add to my family health policy

You can add your spouse, children, parents, and other dependents as per the policy terms, ensuring comprehensive family coverage.

Why should you compare health insurance plans online?

Online comparison helps you find the best plan that suits your needs and budget, offering a clear understanding of coverage and benefits.

Why should you never delay the health insurance premium?

Delaying premiums can result in policy lapse, losing coverage benefits and financial protection, and may lead to difficulties in renewing the policy.

How to get a physical copy of your Insurya Consulting General Insurance

Request a physical copy from the insurer or take a printout of the digital policy document received via email.

Is there a time limit to claim health cover plans?

Claims should be made within the stipulated time as per the policy terms to avoid rejection and ensure timely processing.

What exactly are pre-existing conditions in Health Insurance?

Pre-existing conditions are medical conditions you had before buying your Individual Health Insurance plan. Coverage for these might require waiting periods or exclusions. Be transparent about your health history.

How is the insurer going to pay my hospital bills?

Insurers cover hospital bills through reimbursement (you pay upfront and get reimbursed later) or cashless hospitalisation (insurer settles bills directly with network hospitals).

Are there any tax advantages to purchasing Health Insurance?

Individual Health Insurance premiums often qualify for tax deductions under Section 80D of the Income Tax Act (India).

Why should I need Personal Medical Insurance?

Personal medical insurance offers financial protection against unexpected medical expenses due to illness, accidents, or hospitalisation. It provides peace of mind and safeguards your savings.

How do I go about renewing health insurance plans?

Don’t stress the small things in life! The easiest and quickest way to renew your life insurance policy is by doing it online. Topping up your health cover gives you freedom from worrying about heavy medical expenses.

How is the health insurance renewal premium calculated?

We know that reading through the ponderous terms and conditions section of a health insurance policy isn’t always easy. So, here is the quick answer. Your renewal premium is calculated based on your age and coverage. As always, you can put the power of compounding to good use by investing in health insurance as early as possible.

Can I renew my expired health insurance policy?

Yes, of course. Life can get really busy and even things as important as renewing your health insurance plan can get side-lined. With Insurya Consulting, we turn back the clock to give a grace period where you can renew your expired policy. For 30 days from the expiry date, you can still renew your health cover with ease. Now, you can run the race at yo

Can I renew health insurance online?

Absolutely! All you have to do to renew your health insurance is click or tap a few times! You can definitely renew health insurance policies online and also buy new policy for your family & friends click here to know more.

Will I be able to transfer my health insurance policy from another pro

Yes, as per IRDAI regulations, insurance portability between providers is allowed. This also includes transfer of benefits like Cumulative Bonus and credits relating to waiting period for pre-existing diseases.