Unit Linked Insurance Plans

Fulfil your financial goals and achieve financial security with ULIP. ULIP full form is Unit Linked Insurance Plan, and it is a type of plan with two-fold benefits. You can invest, achieve your long-term and short-term financial goals, and get a life cover to protect your loved ones.

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Highlights of Unit Linked Investment Plan

Guaranteed tax savings
Transparent investments
Multiple options to choose from
Liquidity for unprecedented events
High or guaranteed returns
Lower surrender charges
Fulfilment of financial goals
Life cover

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ULIP - Everything you Need to Know

What is a Unit Linked Insurance Plan?

A Unit Linked policy combines the benefits of insurance and investment, offering market-linked returns without guarantees. It splits your money, with some savings for life insurance and the rest for long-term investments like stocks, mutual funds, or bonds. ULIPs are favoured for their flexibility in fund allocation based on your goals, risk tolerance, and timelines. They also offer tax benefits under the Income Tax Act, 1961.

Types of ULIP

ULIPs have different types of investment funds. Each fund has a diversified portfolio of market-linked securities, and the portfolio is managed by expert fund managers. Based on your risk appetite and investment needs, you can choose from one or more funds to invest your premium.

Equity funds

Riskier investments with sometimes higher returns. It involves investing in the equity of companies, directly linked to market fluctuations.

Debt funds

Invested in instruments like corporate bonds, government bonds, securities, debentures, and fixed-income bonds, carrying medium to low risk with moderate returns.

Balanced funds

Spreads risk by investing in debt and equity funds, offering balanced returns to lower risk.

Cash funds

Directs funds to low-risk instruments like market funds, cash deposits and term deposits, with the lowest returns and risk.

Pension ULIP

Provide regular income post-retirement, focusing on wealth accumulation during working years.

Child ULIP

Long-term investment with life cover for the child’s financial security.

How Does ULIP Work

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Let’s see how a ULIP works in a real-life scenario

Mr. Sharma buys a ULIP
Mr. Verma
For a 20-year period Pays an annual premium of ₹50,000 The sum assured is 10 times the premium i.e. ₹5,00,000
The plan has three different types of funds. He chooses to invest the premium in two funds equally. In such a case, ₹25,000 would be invested in each of the two funds chosen by Mr. Sharma.
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Case 1 – Death during the 7th policy year
The fund value has accumulated to ₹4.25 lakhs. In such a case, since the fund value is lower than the sum assured of ₹5 lakhs, the higher amount which is ₹5 lakhs would be paid as the death benefit.
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Case 2 – Maturity of the policy
If Mr. Sharma survives till the end of the policy tenure of 20 years, the fund value will be paid as the maturity benefit which would be ₹16 lakhs.

Who Should Buy ULIP?

ULIPs are versatile for all types of investors, whether you are starting out or experienced. They are beneficial if you want market-linked returns alongside life insurance. Parents can opt for child ULIPs to secure their child's future, while pension ULIPs are excellent for tax-efficient retirement planning.

Choose the right ULIP based on your investment goals, time horizon, and risk tolerance. Remember, ULIPs don't guarantee returns.

Sanjeev wants to save for his child’s education.
Sanjeev
34-year-old Married Has an 8-year-old child Annual income - ₹10 lakhs

Sanjeev can opt for low-risk plans as he has more time on his hands and less need for financial support at the moment.

Savita wants to save for her comfortable retirement.
Savita
50-year-old Unmarried Annual income - ₹25 lakhs

Savita has less time and enough funds on her hands to build a substantial retirement fund. She needs to opt for high-risk, high-performance funds.

Rohan wants to save to buy a house in the next 15 years
Rohan
25-year-old Unmarried Has a high risk-appetite Annual income - ₹6.5 lakhs

Since Rohan is young, has fewer responsibilities and has a long time to fulfil his goals, he can opt for medium-risk investments or high-risk and high returns and stay invested for the long term.

Preeti wants to save for her children’s future
Preeti
40-year-old Married Has one kid, 15 years of age, whose education fund is taken care of. Annual income - ₹18 lakhs

Since Preeti is already 40 and has a reasonable income, she could invest in high-risk, high-performance funds so that in the next 10-12 years, she can build a sufficient corpus for her child’s marriage.

Features of ULIP

There are some unique features of unit linked insurance plans which give them a distinctive edge:

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Partial withdrawal

After a 5-year lock-in period, ULIPs allow you to make partial withdrawals for financial flexibility.

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Switching

Move your investments between funds for free, up to a certain number of times.

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Top-up premium

Invest additional amounts above your policy's existing premium if your investment performs well.

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Premium redirection

Divert future premiums to a new fund of your choice.

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Settlement option

Choose to receive maturity benefits in instalments instead of a lump sum.

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Readymade investment strategies

Opt for predefined investment strategies to simplify portfolio management for new investors.

Benefits of ULIP

ULIP products offer a host of benefits to policyholders, some of which are mentioned below:

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Dual benefits

Combine insurance coverage with investment growth in ULIPs, where a portion of your premium goes towards a life cover and the rest is invested in market-linked funds.

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Participation in the market

Earn attractive returns by participating in the capital market through ULIPs.

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Expert portfolio management

ULIP funds are professionally managed, to reduce risks and maximize returns by investing in quality instruments.

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Diversification

Enjoy the profitability of various investment instruments with ULIP’s diversified mix of securities.

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Flexibility

Manage your investments flexibly with features like partial withdrawals, switching, premium redirection, readymade investment strategies, etc.

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Tax benefits

ULIPs also offer tax-saving benefits on premiums and benefits received.

Invest As Per Your Capacity and Get Tax Free Returns on Maturity
Invest Per Capacity Banner

Invest 15,000/month

in 10 Yrs Get

₹80 L*

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Invest 10,000/month

in 10 Yrs Get

₹50 L*

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Invest 8,000/month

in 10 Yrs Get

₹40 L*

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5,000/month

in 10 Yrs Get

₹25 L*

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**Past 10 Year annualised returns as on 01-03-2023
*Disclaimer on the investment strategy
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Riders in ULIP

To help you enhance the scope of coverage and customise your policy, ULIPs allow you a host of riders. While the actual riders depend on the policy, the common list of riders are:

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Accidental death benefit rider

Pays an additional benefit in case of the insured’s death in an accident.

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Accidental death and disablement benefit rider

Pays extra if the insured suffers death or permanent disablement due to an accident.

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Critical illness rider

Pays a lump sum if the insured is diagnosed with a covered illness.

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Premium waiver rider

Waives off premiums if the policyholder becomes disabled.

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Terminal illness rider

Pays a lump sum for medical costs if the insured has a terminal illness.

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Family income benefit rider

Pays regular income to the nominee after the demise of the insured.

Tax Benefits of ULIP

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On premium paid

Deduct the lowest of premium paid, 10% of sum assured, or ₹1.5 lakhs from your taxable income.

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On partial withdrawals and switching

Withdrawals after 5 years and switching are tax-free.

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On death benefit

Nominees receive the death benefit tax-free.

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On maturity benefit

Maturity benefits are tax-free, if premiums are 10% of the sum assured and within ₹2.5 lakhs.

Myths About ULIP

This dual-benefit insurance and investment instrument is surrounded by certain myths due to misinformation. Let’s debunk these myths for more clarity on ULIPs.

Myth
ULIPs are risky.
Fact

ULIPs are a combination of insurance and investment that offer a mix of debt and equity options, allowing investors to choose based on their risk tolerance.

Myth
ULIPs are expensive due to high charges.
Fact

While there are certain fees, like administration, fund management, and premium allocation, overall costs are lower than traditional policies which decrease over time.

Myth
ULIPs require mandatory continuation.
Fact

After the 5-year lock-in period, investors can discontinue ULIPs without surrender charges, but staying invested is advisable to build a corpus.

Myth
Volatile markets reduce life cover in ULIPs.
Fact

Life cover remains constant regardless of market changes, ensuring full protection for the nominee in case the insured passes away during the policy term.

Myth
ULIPs offer low returns
Fact

By diversifying investments and holding for a long-term, ULIPs can yield attractive returns alongside life coverage.

ULIP vs. Mutual Funds vs. Traditional Plans

ULIP vs. Mutual Fund

Aspect

ULIP

Mutual Fund

Investment

Provides investment and insurance
Only focuses on investment

Risk Management

Offers in-built risk management options like fund allocation and mortality charges
Investors need to manage risks by themselves or hire an advisor

Costs

Includes administration and other charges that may be refunded
Lower expenses, including management fees and transaction costs

Flexibility

The lock-in period makes it less flexible
High flexibility since investors can buy/sell anytime

Taxation

Maturity and partial withdrawals are tax-free on specific conditions
Capital gains and dividends are taxable

Transparency

Lower transparency in case of fund allocation
Higher transparency in fund allocation

Insurance Benefits

Provides life insurance coverage
No insurance benefits

Returns

Varies based on market performance and other factors
Varies based on market performance and other factors

ULIP vs. Traditional Plans

Aspect

ULIP

Traditional Plan

Investment and Insurance

Provides investment and insurance in a single product
Separate products for insurance and investment

Investment Options

Choose from equity funds, debt funds, or balanced funds
Limited to guaranteed or fixed return options

Flexibility and Control

Investors can switch between investment options or opt for partial withdrawals
Limited flexibility and control on your investments

Fees and Charges

Includes premium allocation charges, fund management charges, etc.
Usually has lower charges - policy administration, premium payment, etc.

Risk and Returns

High potential returns with higher risks due to investments
Lower potential returns with lower risk

Tax Benefits

Both insurance and investment components enjoy tax benefits
Tax benefits are only for the insurance component

Scalability

Ideal for investors with a long-term investment horizon with risk-taking abilities
Ideal for those who want a safe and stable investment with assured returns

How to Select the Best ULIP

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Analyse personal investment goals

Consider your short-term and long-term goals, to choose funds that match your needs and allow flexibility.

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Evaluate risk profile and financial stability

Assess your risk tolerance and financial stability to determine the right asset allocation.

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Solvency ratio

Ensure the insurer maintains a solvency ratio of at least 150% for financial security.

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Check features and benefits

Understand features like fund switch, premium redirection, partial withdrawals, top-ups, etc. for optimal benefits.

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Look for flexibility

Look for ULIPs that offer flexibility in fund choices (debt, equity or both to align with your goals and objectives.

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Choose your investment strategy

Choose a portfolio strategy that suits your investment style - wheel of life, auto-transfer, trigger-based, fortune gain, etc.

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Claim settlement ratio

Opt for insurers with a high claim settlement ratio (over 95%) for reliability.

ULIP Calculator

ULIP return calculator is a tool that helps you calculate your potential returns on investment in a ULIP policy. It takes into account various factors such as premium amount, investment horizon, expected rate of return, and charges to provide an estimate of the maturity value of the policy. Using a ULIP calculator can help you make informed investment decisions and choose the right ULIP policy that suits your financial goals. 

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Goal-based maturity amount

It’s the amount the insurance company will pay to the ​Insured ​​s ​– it can be increased or decreased as per the policyholder’s requirements and financial goals. Based on the maturity amount as per the calculator, one can adjust the premium.

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Invest amount

It determines the amount you need to invest monthly to achieve the desired returns.

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Policy tenure

It involves the period for which your policy will be active - it can be 5 years to 35 years or more, based on when you need the money to fulfil your financial goals.

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Premium period

This is the time frame for which you need to pay the premiums or invest the monthly amount to get the desired returns.

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Return

The expected returns are calculated along with a rate of interest and average market conditions.

Charges in ULIP

When you purchase a unit-linked insurance plan, the insurer charges fees for its services. The IRDAI sets limits on these charges that insurers can impose. It's recommended to hold onto ULIPs for a long term, not just for better returns but also to potentially get back premium allocation charges. Seeking expert advice can help you choose ULIPs with lower fees or ones that refund charges.

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Premium allocation charge

Covers initial expenses like underwriting and commissions, medicals etc.

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Mortality charge

Covers insurance, and is lower for younger investors.

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Fund management charges

Capped at 1.35% of the total fund value annually by IRDAI.

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Policy administration charges

Fixed or a percentage of the total fund value.

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Fund switching charges

Some offer free switches, while others may charge a nominal amount beyond the free switches.

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Partial withdrawal charges

Applied to partial fund withdrawals.

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Premium redirection charges

Incurred when redirecting new premiums to a new fund.

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Premium discontinuation charges

Also known as surrender charges, applied as penalty for early plan surrender.

Switching of Funds in ULIP

Insurers allow you to switch funds within your ULIP, which means you can move units between equity, debt, etc. This helps you shift funds from underperforming areas to more profitable ones.

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Details

Each ULIP offers 4-5 funds; choose based on your goals and risk tolerance. Monitor performance and switch funds accordingly.

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Benefits

Customize investments to match risk tolerance, minimizing losses and maximizing returns.

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Charges

Typically, 5-10 free switches are offered, post which there are charges ranging from ₹50 to ₹500.

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Timing

Monitor your ULIP's Net Asset Value (NAV) for changes in financial goals or market conditions, making switches as required.

How to Buy ULIP

1
Share personal details

Input basic details along with gender, age, coverage amount, annual income, occupation, etc., to begin the policy procedure.

2
Browse plans

Check the various plans offered by different insurance companies and shortlist the plans. 

3
Compare shortlisted plans

Once you’ve shortlisted 2-3 policies that suit your requirements, compare them online. 

4
Add riders

Select the appropriate riders or add-ons to the policy for additional benefits.

5
Complete proposal form

Enter proposer details for cKYC, medical information and nominee details.

6
Make payment

Pay for the policy online using credit/debit cards, UPI, wallets, or net banking. 

7
Upload documents

Provide documents for ID proofs, address proof and salary proof.

8
Get the policy

The proposal is submitted to the insurance company for approval. Once approved, the customer will receive the policy ​copy ​by email.

Simple Steps and Assistance for Buying an ULIP Plan

At Mahindra Paybima, buying an insurance plan is easy and you can opt for an advisor’s help anytime!

Simple and
Easy-to-follow Steps
Comparison of Top
Plans for Free
Help from Certified
Advisors Anytime
Honest Advise.
No Force Selling

How to Buy ULIP

1
Share personal details

Input basic details along with gender, age, coverage amount, annual income, occupation, etc., to begin the policy procedure.

2
Browse plans

Check the various plans offered by different insurance companies and shortlist the plans. 

3
Compare shortlisted plans

Once you’ve shortlisted 2-3 policies that suit your requirements, compare them online. 

4
Add riders

Select the appropriate riders or add-ons to the policy for additional benefits.

5
Complete proposal form

Enter proposer details for cKYC, medical information and nominee details.

6
Make payment

Pay for the policy online using credit/debit cards, UPI, wallets, or net banking. 

7
Upload documents

Provide documents for ID proofs, address proof and salary proof.

8
Get the policy

The proposal is submitted to the insurance company for approval. Once approved, the customer will receive the policy ​copy ​by email.

Simple Steps and Assistance for Buying an ULIP Plan

At Mahindra Paybima, buying an insurance plan is easy and you can opt for an advisor’s help anytime!

Simple and
Easy-to-follow Steps
Comparison of Top
Plans for Free
Help from Certified
Advisors Anytime
Honest Advise.
No Force Selling

Documents for Buying ULIP

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Address proof: Driving license/bank statement or passbook with latest entries/passport/voter ID/ Aadhaar card/ration card

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Identity proof: Aadhaar card/voter ID/passport/PAN card

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Age proof: PAN card/ Aadhaar card/passport/voter ID/marriage certificate/ration card/birth certificate/driving license

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Photo: Passport-size photographs of the individual

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Income proof:

  1. For high sum assured cases, income proof is also needed.
  2. Salary slips of last 3 months/ Income Tax Returns/ employer certificate/ latest bank statement/ latest form 16

Ask Anything as We Have Answers to Everything in Insurance

Yes, you can buy a ULIP life insurance plan in the name of your minor child. ULIPs allow children aged 30-90 days and above to be covered under the plan. So, check the minimum entry age and if your child fulfils the minimum entry age criterion, you can insure him/her under the plan.

Usually, ULIPs are offered for a minimum period of 5-10 years and a maximum tenure up to 40 years. However, there are ULIPs which also allow lifelong coverage and continue till you reach 99 or 100 years of age.

ULIPs have a minimum lock-in period of 5 years before which you are not allowed to surrender. If you discontinue the premium after 3 years, the fund value would be transferred to a discontinued policy fund. Discontinuation charges would be deducted from the fund for the next 2 years. Once the lock-in period is over, you would be allowed to withdraw your fund value from the discontinued fund.

Enhancement of the sum assured depends on the plan’s terms and conditions. Some ULIPs allow enhancement of the sum assured during the policy tenure while others don’t. So, read your policy document to understand if an enhancement is allowed or not.

You can claim a deduction for the premium paid up to a maximum limit of Rs.1.5 lakhs under Section 80C. However, if your premium is more than 10% of the sum assured, premium up to 10% of the sum assured would be allowed as a deduction.

Yes, there is a minimum and maximum limit on the amount of partial withdrawals that you do. This limit depends on the policy. However, almost all ULIPs ensure that after the withdrawal, your fund value should be equal to at least one annualised premium.

Yes, you can buy as many ULIPs as you want. There is no restriction on the number of ULIPs that you can buy.

Yes, an additional premium is required for the rider. However, under ULIPs, you don’t have to pay the premium. The cost of the rider is deducted from the fund value as the rider coverage charge.

Some plans allow you the flexibility to avail of the death benefit in installments rather than in one lump sum. However, this benefit is plan specific and you should check your policy to find out if you can avail of the death benefit in installments or not.

No, on maturity, the fund value is paid even if it is lower than the sum assured.

Yes, some ULIPs allow coverage on a joint basis. So, check for plans which allow such coverage because not all ULIPs have this feature.

ULIPs allow different types of premium payment modes. You can pay a single premium, limited premium, or regular premium for the policy if the policy allows.

Under pension ULIPs, you are allowed to withdraw up to 60% of the accumulated fund value in lump sum. The remaining fund value should, then, be used to either buy a single premium deferred annuity plan or an immediate annuity plan.

No, the returns under ULIPs are not guaranteed. They depend on the market movement.

No, you cannot lower the charges associated with ULIPs. The charge structure is designed by the company and is applicable for all policyholders. However, if you look for plans that refund some of the charges on maturity, you can lower the effective charges deducted from your fund value.

Nomination is not mandatory. However, it is advisable to nominate an individual to receive the death benefit otherwise, if the insured dies, his/her legal heirs would have to make a claim by proving their legal status as the deceased’s heirs.

Yes, a loading is applicable if you pay monthly premiums, if you have an adverse medical history, if you smoke, etc. However, no additional premium is payable for the loading. The loading is adjusted as an increase in the ULIP charges.

If you are aged above 45 years, or if you opt for a high sum assured or if you have an adverse medical condition then you would have to undergo a health check-up before buying the policy.

Usually, ULIPs allow individuals aged up to 65 years to buy the plan. In some plans, however, the maximum entry age can be up to 70 years too.

Most ULPIs allow a sum assured of 1.25 times the top-up premiums if you are aged up to 45 years. For higher ages, the sum assured is calculated as 1.10 times the top-up premium.