5-factors-affecting-investors-perceptions-towards-ulip

5 Factors Affecting Investors’ Perceptions Towards ULIP

Get the real facts about ULIP returns and how they benefit disciplined investors.

Written by : Knowledge Centre Team

2026-01-25

974 Views

6 minutes read

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You now have a wide range of choices when it comes to investment options. As the choices increase, so does the task of assessing which plan suits you the most. 

Perception, however, can be based on experiences rather than information, as information is fluid and constantly changing. In the case of ULIP investment, investors’ perception has been defined mostly by prior experiences and published articles.

Though for some, ULIP could be a good, bad or average investment, you should choose ULIP as per your investment needs. Let’s move forward to understanding different perceptions around ULIPs and how you can benefit from them

Key Takeaways


  • ULIPs offer life cover and market-linked returns in one single plan.
  • You can switch between equity and debt funds anytime with ULIPs.
  • ULIPs allow partial withdrawals after five years of investment.
  • Investors get loyalty additions and bonuses for staying invested.
  • Perceived risks in ULIPs vary with fund choices and market outlook.

What are the Factors Affecting Investors’ Perceptions of ULIPs?

Every investment instrument comes with a specific set of features and options to help you invest for specific goals. ULIPs are the same and could be the best choice for certain goals, while not so good for others.

Here are some of the most influential factors in your decision about ULIP investments and facts about them simplified:

  • Returns from ULIP Investment: Your perception about returns from ULIP could range from they are good to not so good. However, the ULIP provide adequate flexibility for investors to maximise their returns.

    Since ULIP investments are linked to the market, returns are not guaranteed. However, if you manage your investment with a disciplined approach and give enough time for your money to grow, ULIPs can offer better returns.

    Returns are also determined by your ability to invest in high-risk assets, for example, equity funds. However, taking additional risk is not the only factor to derive higher returns for yourself. You also want to manage your investment risk to maximise and stabilise your returns.
  • The Reality: ULIPs have many unique benefits that are not available with other investment plans. For example, a guaranteed death benefit ensures that your family will receive a minimum sum of money in the case of your early death.

    Another important benefit, also associated with the life insurance cover in the plan, is the goal protection benefit. This is one option that, if you choose, will not only ensure a minimum death benefit to your family but also carry on the investment to provide the intended maturity value.

    This benefit helps protect the family’s goals from an unfortunate event like early demise. Additionally, ULIP add bonus units to your portfolio if you invest for a longer term.

    Finally, ULIPs also offer you tax benefits. You can claim a deduction of up to ₹1.5 lakhs under section 80C on the money invested every year. If you keep your total annual investment in ULIP below ₹2.5 lakhs, the maturity value and withdrawals will also be tax-free.

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  • Risk Factor in ULIP Investment: The general perception about ULIP investment is that these are high-risk products. This could be because we already have a lot of long-term safe investment options. Thus, many advisors prefer to position ULIPs as equity investment instruments, which implies higher risk.
  • The Reality: ULIPs are suitable for all risk types. The fact is that ULIPs offer investors multiple asset options, including high-growth equity funds. However, if you are a safe investor or just want to avoid volatile equity markets, ULIPs also have the option of well-diversified debt and liquid funds.

    Thus, while your investment will remain linked to the market, you can hope to keep the growth less volatile, i.e. less risky.
  • Charges In ULIP: Another factor that can affect an investor’s decision is the price of the investment, specifically how much it will cost the investor. Charges are the costs your policy will incur. You don’t want a policy that is heavy on your pocket and brings with itself a range of charges.

    ULIPs are always seen as a costly affair. According to the studies, most people say that the premium associated is high or very high.
  • The Reality: Contrary to general belief, ULIPs are easy on the pocket. The charges have been reduced considerably over the past few years. Fund management charges also remain lower than 1.35 per cent as regulated by IRDAI.

    Policies such as Promise4Growth Plus by Canara HSBC Life Insurance have only fund management charges and risk charges levied on the policy. It will also return the mortality charges it collects if you survive the policy term.
  • Cost of Switching Between Funds in ULIPs: The general perception about ULIPs is that you can have very few free switches throughout the policy term. After free switches, moving your money between funds will become expensive. 
  • The Reality: Yes, some plans charge you after free switches, but here are the facts you should consider at the same time:
    1. You may not need to actively switch between funds manually.
    2. Automated portfolio management options are better for disciplined portfolio management.
    3. Few ULIPs, especially online ULIPs, allow unlimited free switches.

This is a unique feature of ULIPs, and the best way to use it is with an automated handle that your portfolio follows market performance without fail and helps you manage your risk and maximise growth.

  • Flexibility of Withdrawals – Liquidity in ULIPs: Liquidity is an important factor in any investment. ULIP investment, being a life insurance plan, has a perception of being illiquid. However, the reality is somewhat different when it comes to flexibility with withdrawals and everything else.
  • The Reality: You have the option to choose the funds as per your risk appetite in ULIP. They also give you the freedom to choose the ratio in which you want to allot funds in various securities.

    You can also withdraw money partially after the lock-in period of the policy. ULIPs provide a partial withdrawal option. The lock-in period in ULIP is five years, and it has the following effect on your investment:
    1. No withdrawals are allowed within the lock-in period.
    2. The policy cannot be surrendered within the lock-in period.
    3. The policy will acquire paid-up value if you stop paying the due premiums within this period.

Thus, within the lock-in period, the policy remains somewhat illiquid, and the only death benefit is payable. However, after the five-year lock-in period, you can start to withdraw money from the policy.

Benefits of ULIP

The general perception of ULIPs is that they offer a small life insurance component, which makes them an expensive investment proposition. Some may even suggest going for a separate term cover and investing in a mutual fund, instead of a ULIP.

The reality, however, could be a little more different and beneficial than that.

The following are some of the top benefits of choosing ULIP as your investment option:

  • ULIP (Unit Linked Insurance Plan) is one of the few financial tools that gives you life cover along with market-linked returns. You stay protected while your money grows over time.

  • Under Section 80C of the Income Tax Act, your ULIP premiums are eligible for tax deduction up to ₹1.5 lakh. The maturity amount is also tax-free under Section 10(10D), subject to certain conditions.

  • ULIPs offer the option to switch between equity, debt, or balanced funds depending on your risk appetite or market conditions. This helps you stay in control of your investments.

  • Whether you’re planning for your child’s education, retirement, or buying a home, ULIPs let you align your investment horizon and strategy with specific life goals.

  • Because a part of your premium is invested in market-linked funds, you get the advantage of compounding returns over time. Staying invested for the long term helps you beat inflation and grow your corpus significantly.

Conclusion

Understanding how perception influences investment decisions is key when it comes to choosing the right financial tool. ULIPs may often be misunderstood due to past practices or limited knowledge, but modern ULIPs offer much more than before. They combine life insurance with investment in a flexible and tax-efficient manner. Whether you are a conservative investor or someone with a high-risk appetite, ULIPs can be tailored to your needs. 

At Canara HSBC Life Insurance, our ULIP plans are designed to help you invest with confidence while securing your family's future. Explore our ULIP plans today and begin your journey towards smarter, safer financial planning.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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