Vital things to look at in a low-cost ULIP

There are certain things to look at when you go for a low cost ULIP (Unit linked insurance plan). 

It is vital to understand what your insurance policy offers so that you can take a look at all the different options and choose what works best for you.


What is a ULIP Plan?

ULIP policies have been around for years now. They allow the premium you pay to be divided into two parts. One part goes towards your life insurance cover; the other part is invested in equity funds or debt-oriented funds such as bonds.

Investors get to choose what kind of funds they prefer their investment to go into depending on how much or how little risk they prefer to take.

ULIP performance

Based on your ULIP performance, investors also have the option of switching where their money is being invested.

Choosing your ULIP policy

There are numerous insurers that provide ULIPs with great schemes at seemingly low costs.

You should take the time to understand what these low-cost ULIPs offer and, more importantly, what features they lack. Let’s delve into the vital things to look at in a low-cost ULIP:


Your insurer will inform you of what costs they are going to levy. The charges range from 1% upwards of your premium. Although your ULIPs are generally transparent, make sure you are fully aware of what these charges are.


Option to switch funds

Various factors change how much risk an investor is willing to take, which could be their financial goals or commitments. 

Top-tier insurers allow investors to switch their funds and where they are invested at different intervals.

Keep in mind and understand what terms and conditions need to be met to switch funds.


Types of funds

Your investment is likely to offer better returns with insurers that have a wider portfolio of investment options. Look for insurers that offer their investors more options.


You need to know what your money is doing. Go with a trusted insurer that will offer you timely, transparent reports. These reports will inform you of where your money is invested, and how the market is doing.

These reports also help you decide if your ULIP performance is as desired or if you want to switch the types of funds you have invested in.


Twofold tax benefits

Check with your insurer about the latest updates on tax benefits. Tax laws are often updated and tweaked.

Generally, when investing in a ULIP, you gain two tax benefits. Deductions under section 80C of up to Rs. 1.5 lakhs of investment annually and benefits upon the maturity of your funds. The capital gains on your maturity amount are exempt from taxes under section 10.


Other benefits

If premiums are paid up consistently until the maturity date, you will be asked to submit discharge forms along with the other essential documents. It is vital that you ask your insurer specifically about what benefits you will receive if you consistently pay your premium until maturity and about the withdrawal process.

It is also vital to understand what happens if the insured individual is unable to pay their premiums until the date of maturity. Most insurers offer the assured amount to the designated nominee. Have clarity on this and make sure your nominee is fully aware as well.


Lock-in period

ULIPs mostly have a lock-in period. This means that the funds cannot be withdrawn before maturity. Early withdrawal may attract certain fees.



You can also make use of an ULIP calculator to understand plans better. This can help you understand what financial goals you need to set to achieve your desired outcome.

Before finalising your ULIP, use this blog to note down the vital things to look at in a low-cost ULIP policy.

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