ULIPs for Long-term Investors – Secure Your Financial Future

Know why ULIPs are a popular choice for long-term investors. Know how it secures your financial future.
Check Life Insurance Policies
3 min
23-May-2025
Investing for the long term is a crucial strategy for wealth creation and financial security. Among various investment options, Unit Linked Insurance Plans (ULIPs) have gained popularity among long-term investors in India. ULIPs offer the dual benefit of insurance and investment, allowing individuals to grow their wealth while ensuring financial protection for their families. With flexible fund-switching options and tax benefits, ULIPs serve as an ideal vehicle for those looking to invest with a long-term perspective. This article explores why ULIPs are a preferred choice for long-term investors and how they can help secure a strong financial future.

Why choose a long-term investment strategy?

A long-term investment approach enables individuals to build substantial wealth, mitigate market risks, and achieve financial goals systematically. Rather than focusing on short-term market fluctuations, long-term investments allow capital to grow over time, ensuring better returns and financial stability.

Key reasons to adopt a long-term investment strategy:

Compounding benefits –

Long-term investments leverage the power of compounding, where returns generated over time are reinvested, leading to exponential growth.

Lower risk over time –

While short-term investments are vulnerable to market volatility, long-term investments smooth out fluctuations and reduce risks.

Better financial discipline –

Committing to long-term investments instils financial discipline and prevents impulsive financial decisions.

Tax advantages –

Many long-term investment options, including ULIPs, offer tax benefits under Section 80C and Section 10(10D) of the Income Tax Act.

Higher potential returns –

Investments held over a longer duration generally outperform short-term options, yielding higher returns.

Ideal investment options for long-term investors in ULIPs

ULIPs are an excellent option for long-term investors as they provide market-linked returns while offering life insurance coverage. Investors can choose from various fund options based on their risk appetite and financial goals.

Ideal ULIP investment options for long-term investors:

Equity funds –

Ideal for investors with a high-risk appetite, equity-oriented ULIPs invest in stock markets, offering substantial long-term growth.

Debt funds –

Suitable for moderate-risk investors, debt ULIPs focus on bonds and government securities, ensuring stable and consistent returns.

Balanced funds –

These ULIPs invest in a mix of equities and debt instruments, providing a balanced approach for investors looking for both growth and stability.

Life-stage-based funds –

These ULIPs automatically adjust asset allocation as per the investor’s age, shifting from equity to debt as they approach financial maturity.

Index-linked funds –

Investing in indices like the Nifty or Sensex, these ULIPs mirror market performance and are ideal for passive investors.

Read more: ULIP returns

Key benefits of long-term investments in ULIPs

ULIPs offer several advantages for long-term investors, making them a preferred choice over other investment options. The combination of insurance, investment, and tax benefits ensures financial security while maximising returns.

Key benefits of ULIPs for long-term investors:

Wealth creation –

ULIPs help in building a significant corpus over time, leveraging market-linked returns and compounding benefits.

Life insurance coverage –

Unlike traditional investments, ULIPs offer life insurance, ensuring financial security for loved ones.

Flexibility to switch funds –

Investors can switch between equity, debt, and balanced funds based on market conditions and risk preferences.

Tax-free maturity benefits –

Under Section 10(10D), ULIP proceeds are tax-free if the premium does not exceed 10% of the sum assured.

Liquidity with partial withdrawals –

After the 5-year lock-in period, ULIPs allow partial withdrawals to meet emergency financial needs.

Diversified portfolio –

By investing across different asset classes, ULIPs help mitigate risk and optimise returns.

Conclusion

For long-term investors, ULIPs serve as an excellent investment tool that combines insurance protection with wealth creation. By offering flexible fund allocation, tax advantages, and market-linked returns, ULIPs stand out as a strategic choice for those looking to build a secure financial future. While they require a long-term commitment, their benefits far outweigh the risks, making them one of the most rewarding investment options available today.


Frequently asked questions

What is the ideal life insurance plan for long-term investment?
The ideal life insurance plan for long-term investment is a ULIP as it combines insurance with investment, offering market-linked returns, flexible fund options, and tax benefits. It helps in wealth accumulation while ensuring financial protection for beneficiaries.

Can I withdraw funds from my ULIP before maturity?
Yes, ULIPs allow partial withdrawals after a 5-year lock-in period. This feature provides financial flexibility in case of emergencies, but it is advisable to stay invested longer to maximise returns.

How much life insurance cover should I opt for?
Your life insurance coverage should ideally be 10-15 times your annual income, ensuring your family’s financial stability in case of unforeseen events. Factors like liabilities, future expenses, and existing savings should be considered while deciding the coverage amount.

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*T&C Apply - Bajaj Finance Limited (‘BFL’) is a registered corporate agent of third party insurance products of Bajaj Allianz Life Insurance Company Limited, HDFC Life Insurance Company Limited, Life Insurance Corporation of India (LIC), Bajaj Allianz General Insurance Company Limited, SBI General Insurance Company Limited, ACKO General Insurance Company Limited, HDFC ERGO General Insurance Company, TATA AIG General Insurance Company Limited, ICICI Lombard General Insurance Company Limited, New India Assurance Limited, Chola MS General Insurance Company Limited, Zurich Kotak General Insurance Co. Limited , Star Health & Allied Insurance Co. Limited, Care Health Insurance Company Limited, Niva Bupa Health Insurance Company Limited , Aditya Birla Health Insurance Company Limited and Manipal Cigna Health Insurance Company Limitedunder the IRDAI composite CA registration number CA0101. Please note that, BFL does not underwrite the risk or act as an insurer. Your purchase of an insurance product is purely on a voluntary basis after your exercise of an independent due diligence on the suitability, viability of any insurance product. Any decision to purchase insurance product is solely at your own risk and responsibility and BFL shall not be liable for any loss or damage that any person may suffer, whether directly or indirectly. Please refer insurer's website for Policy Wordings. For more details on risk factors, terms and conditions and exclusions please read the product sales brochure carefully before concluding a sale. Tax benefits applicable if any, will be as per the prevailing tax laws. Tax laws are subject to change. BFL does NOT provide Tax/Investment advisory services. Please consult your advisors before proceeding to purchase an insurance product. Visitors are hereby informed that their information submitted on the website may also be shared with insurers. BFL is also a distributor of other third-party products from Assistance Services providers such as CPP Assistance Services Pvt. Ltd., Bajaj Finserv Health Ltd. etc. All product information such as premium, benefits, exclusions, sum insured, value added services, etc. are authentic and solely based on the information received from the respective insurance company or the respective Assistance service provider company.

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