Frequently Asked Questions about ULIP Plans

Over a decade ago, Unit Linked Insurance Plan (ULIP) which was once popular for their incredibly high charges have now toned down, subtly. There was a time when a majority of investors preferred investing their hard earned money in mutual funds due to more gains.

However, after the constant changes in the regulations over the due course, the popularity of ULIPs grew rapidly because of its numerous benefits. Being a dual product, it not only ensures protection but also growth. Since LTCG made reforms recently, a majority of investors are still unaware of the uses and benefits of new-age ULIPs. So if you belong to the same club, then find out more about it based on these FAQs:

List of Frequently Asked Questions (FAQs) about ULIPs:

Unit Linked Insurance Plan (ULIP) is a policy that offers the dual benefits of investment and insurance. Having said that, it offers its investors with the benefits of savings as well as growth. That way, ULIPs ensure not only the protection of your family but also your participation in equity markets. In addition to this, the nominees of the policyholder receive a life coverage i.e. sum assured or fund value, whichever is higher.

  • What are the things to keep in mind before investing in a ULIP?

While an investment in ULIP is important, the knowledge about the pre-investment procedure is equally beneficial. Understanding a few things about ULIPs before you invest in them helps you stay updated about the product. Take a look at these things you should keep in mind before you invest in this policy:

  • Feature and benefits
  • Charges and returns
  • Rate of premium
  • Limitations and exclusions
  • Other additional benefits
  • Why should I invest ULIPs?

Unawareness about the policy usually gives rise to this question. However, ULIPs does provide its customers with maximum benefits. Here are a few advantages offered by a ULIP Policy which will eventually make your investment worth it:

  1. Provision of life coverage
  2. Supply of higher returns
  3. Generation of wealth
  4. Exemption from the payment of taxes
  5. Provision for multiple funds and switching policy


  • What are the ULIP charges?

Unlike mutual funds, ULIPs provide investors with different charges under the policy. Given below is the list of ULIP charges offered by a ULIP Policy. However, the charge structure depends on the plan and the insurance company. Go through these 4 main charges levied by the ULIPs:

  1. Policy administration charge
  2. Fund management charge
  3. Premium allocation charge
  4. Mortality charge


  • What are the benefits of ULIP Plans?

Investing in ULIPs means getting to enjoy its several benefits. While there might be tons of investment benefits, a few of the important ones are mentioned below:

  1. Tax benefits
  2. Death benefits
  3. Maturity benefits


  1. What role does Net Asset Value (NAV) play in ULIPs?

Net Asset Value (NAV) is the value of per unit of the fund given on that day. The NAV of that fund is shown on the website of your insurance company.

  • How does my ULIP Policy lapse?

A policy lapse is the last thing that an investor wishes for. There are a few reasons why your ULIPs might lapse. In this case, you should renew your policy within 2 years to get started with the policy again. Given below are the reasons that will help you understand why your policy lapses and why you should renew it:

  1. When you forget to make the premium payment
  2. When you surrender the policy

With these answers to your FAQs, you will be ready to make an investment in the right type of ULIP funds.  It is a bad idea to invest in a plan based on just the brochure of the company or the promotions of the company. Conduct thorough research and analyze the plan carefully. Once you do so, only then are you prepared to invest in the right ULIP Plan of the year.


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