Friends, I'm sure you all must have heard about ulip, but I'm aware that many of you out there still don't have a correct and thorough idea about ulip. Through this post we will learn what are ulip in detail and will cover each and every detail you would like to know about ulip.


Friends ulip stands for unit linked insurance plan. Through ulip you get double benefit of insurance as well as investment.

Ulip = life insurance + investment.

Ulips gives you options to invest in debt, equity or hybrid funds.

Payment of premium

Friends under ulip you have options to pay your premium in one go ( single premium ) or you can pay it annually, half yearly or quarterly.

Lock in period

Friends if you are going for ulip then one important thing that you have to note is, ulip come with a lock in period of five years.

You cant withdraw the premium amount before completion of five years, yes but you can surely surrender it. But it is not advisable to surrender it before five years as the surrendered value would be very less.

Even if you have surrendered it before completion of 5 years then too you will not be handed over that amount, infact the surrendered amount will be transferred into discontinued policy fund which earns you an interest of 4.7% annually.

And only after completing 5 years that surrendered amount along with accrued interest will be given to you.

Balancing option.

With changes in your life stages, the risk that you can afford to take also changes. Hence ulip provides you balancing option so that along with changes in your risk appetite you can shuffle your portfolios allocation from equities to debt.

It is highly advisable to stick with greater percentage of equities in the initial stages of your term and as one nears to his maturity, he can shift his maximum allocation to debts.

Ulip charges.

Friends there are many hidden charges in ulip, most of the times the insured is unaware of these charges, this is because the company doesn't openly disclose it to the insured.

Premium allocation charges - its X% of your premium amount.

Policy administration charges - it is a flat % of your policy amount.

Mortality charges - this charge depends upon the age and health of the insured.

Fund management charges - this charge is taken for managing your fund.

Surrender charges - one attracts surrender charges if he/she surrenders the policy before lock in period.

These were some charges that ulip charge from the insured. These charges varies from insurance company to company.

Ulip and taxation.

Friends there is no upper limit for investment in ulip, but the thing to note is you can claim only 1.5 lakhs as exemptions under section 80c.

Under ulip your invested amount, returns and maturity amount is tax free only if your sum assured is 10 × premium amount.

If your annuall premium if more than 1 lakh then a 2% TDS is charged.

And if you are surrendering your policy before lock in period then all the benefits that you had got under 80c while investing will be reverted.

Ulip and returns.

Friends it's very difficult to estimate its average returns as we have an equity component involved in ulip.

But if we take historical data, then it is seen that one can expect between 7-12% returns from ulip.


Many people buy ulip because they get life insurance and investment together. But because of the same reason they remain under insured, as the premium amount for ulip is higher.

So if you ask me, my answer would be shun ulip as it is always better to keep your insurance and investment separate.

Friends for life insurance you can consider buying a term plan and for investment purposes you can go with mutual funds.

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