3 min
31-May-2025
Unit Linked Insurance Plans (ULIPs) are a popular investment-cum-insurance option for individuals looking to grow their wealth while securing their future. However, one of the key concerns for investors is the associated charges, which can impact overall returns. ULIPs come with different charges, including premium allocation, fund management, and mortality charges. Understanding these charges and strategies to minimise them can significantly enhance the ULIP returns on your investment. With the advent of online ULIPs, transparency in cost structures has improved, allowing investors to make better financial decisions. This article explores how ULIPs work, their benefits, and effective ways to minimise costs to boost returns.
Key features of ULIPs:
Key benefits of ULIPs:
Steps to choose the best ULIP:
Strategies to boost ULIP returns:
What are ULIPs and how do they work?
ULIPs are hybrid financial products that combine life insurance with market-linked investment opportunities. They allow policyholders to invest in equity, debt, or balanced funds based on their risk appetite.Key features of ULIPs:
Dual benefit of insurance and investment
A portion of the premium goes towards life insurance, while the rest is invested in market-linked funds.Flexibility in investment choices
Investors can switch between equity, debt, or balanced funds as per market conditions.Tax benefits
Investments in ULIPs qualify for tax deductions under Section 80C, and maturity benefits are tax-free under Section 10(10D).Lock-in period
ULIPs have a five-year lock-in period, ensuring disciplined savings.Market-linked returns
Returns are based on fund performance, allowing potential wealth accumulation over time.Partial withdrawals
After the lock-in period, investors can withdraw a portion of their funds for emergencies.Fund switching options
Investors can switch between funds based on market trends without incurring additional tax liabilities.Key benefits of investing in ULIPs
ULIPs provide a structured approach to financial planning by offering insurance coverage along with long-term investment growth.Key benefits of ULIPs:
Wealth creation
Market-linked investments help accumulate wealth over time.Financial security
The life cover ensures financial protection for the policyholder’s family.Portfolio diversification
Multiple fund options allow investors to balance risk and returns.Systematic investing
ULIPs encourage disciplined and long-term investment habits.Liquidity
Partial withdrawals provide financial flexibility after the lock-in period.Tax savings
Tax exemptions make ULIPs a tax-efficient investment vehicle.Transparency
Online ULIPs provide clear details on charges and fund performance.How to choose the right ULIP for high returns?
Selecting the right ULIP plan is crucial to maximising returns.Steps to choose the best ULIP:
Define financial goals – Identify long-term objectives such as retirement, education, or wealth accumulation.
Assess risk appetite – Choose funds based on risk tolerance, from aggressive (equity) to conservative (debt).
Compare cost structures – Look for ULIPs with lower charges to improve net returns.
Check past performance – Review the track record of the ULIP funds to ensure consistent growth.
Consider fund switching flexibility – Opt for ULIPs that allow easy fund switching based on market trends.
Review policy terms – Ensure the lock-in period, withdrawal conditions, and maturity benefits align with your financial needs.
Look for loyalty additions – Some ULIPs offer additional fund units as loyalty rewards, enhancing returns.
Tips to maximise returns from ULIPs
Reducing charges and optimising fund allocation can enhance ULIP returns.Strategies to boost ULIP returns: