How to Choose the Best Plans for ULIP?

A ULIP can prove to be an extremely handy investment tool. Since it combines insurance with investment, it carries a level of security with it. This makes the unit linked insurance plans very attractive to many people. If you too are planning to invest your money in a ULIP, there are a few important things that you should know. Take a look at this article to know more.

Things to consider before buying ULIP plans

What are the important factors that you must consider before you buy a ULIP? Let us find out:

  • Types of funds: Did you know that different types of funds are available in ULIPs? That is correct – you can choose between some varieties of funds when you look to invest in a ULIP. There are low risk funds such as the debt funds and high risk funds such as the equity funds. There are also balanced funds that space out the risks. The low risk funds offer lower yields and vice-versa. You have to assess your own risk appetite and then choose a fund you are comfortable with.
  • Your investment goals: It is absolutely crucial for you to determine your investment goals before you buy a ULIP. Do your own research, instead of solely relying on the advice of your broker. If you have a small-term financial goal, a well-performing equity fund ULIP investment may work for you. If you have a more conservative, long term financial plan, a ULIP with a balanced fund may be more suited for you. So keep your financial goals in the forefront when selecting the ULIP.


  • Fees and charges: Like all financial products, ULIPs also have a set of fees and charges associated with them. Be aware of these expenses as they will be deducted from your fund value. You will be charged a premium allocation fee, administrative fee, a fund management fee and a surrender fee (if applicable), among others. Go through the ULIPs of the various companies to see who offers a more reasonable and affordable fee structure.
  • Flexibility of switching: A unit linked insurance plan allows you to switch between the funds even when the investment is in progress. Each insurer however, has different norms related to this. The company you buy your ULIP from should offer flexibility in the switching options. Run this very important point with your ULIP provider before you buy the plan.
  • Tax benefits: You are entitled to many tax benefits when you invest in a unit linked insurance plan. You get a deduction under Section 80C of the Indian Income Tax Act, 1961 for the premium you pay. You also are not required to pay taxes on your maturity benefits if it is 10 times higher than the premium you paid. So if you invest carefully, you can get many tax benefits out of your ULIP.

ULIPs with other benefits

You get many benefits when you invest in a ULIP. Like mentioned above, a ULIP is an excellent tax saving tool.  Apart from this, you also get to combine the elements of insurance and investment in a single product. So while a part of your money grows and expands your wealth, another part is securely put away to cover your life. The risk therefore is beautifully balanced in a ULIP. Speaking of risk, a ULIP is one of the very few investment tools that allows you to invest as per your own risk