5 reasons you should invest in ULIPs right away!

5 Reasons you Should Invest in ULIPs Right Away!

ULIPs are unique tax-saving investments with long-term benefits, flexibility, and life cover for your financial goals.

Written by : Knowledge Center Team

2025-10-07

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6 minutes read

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Do you often find yourself scrambling through the internet looking to invest money so that you can save some tax in this financial year? If yes, it is likely that you’ll end up making hasty decisions and in just a few years you will also feel that most of these investments are not useful enough for you.

Key Takeaways

  • ULIP provide tax-saving benefits beyond one financial year.
  • You can customise ULIP investments anytime.
  • ULIPs offer life cover along with wealth creation.
  • Returns are tax-free within policy rules.
  • Adjusting investments later is easy as your income grows.
  • Planning goals before investing helps maximise benefits.

Why Do We Make Hasty Tax-Saving Decisions?

Tax-saving investments often have a long lock-in period, during which you cannot withdraw any money from the investments. That is why a little planning is necessary when you want to invest for tax savings.

But, often you are stuck with urgent timelines of showing your investment proof and need a quick investment option which you may not regret later. Unit linked insurance plan or ULIP is one such investment where you may invest first and seek goals later, although you should prefer to plan your goals first and invest later.

What is ULIP | Unit Linked Insurance Plan |

What Makes ULIPs Unique? 

Here’s what makes ULIPs unique and un-regrettable for quick tax-saving decisions:

Long-Term Investment:

ULIPs are designed as long-term investment tools that also offer tax-saving benefits year after year. So, even if you had to make a quick decision to save tax this year, you won’t need to rush again next year. By continuing with the same ULIP plan, you not only meet your annual tax-saving goals under Section 80C but also stay on track for building long-term wealth and securing your financial future

Highly Customisable:

ULIPs are highly customisable even after you have started investing in the plan. You can change the portfolio strategy, allocation, and even transfer funds to a different fund option within the ULIP.

Although ULIPs have multiple asset allocation strategies you can use, you always have control over your portfolio. Once you decide to allocate the ULIP investment to one of your financial goals, you can readjust the fund allocation to minimise risk.

You would want to assign your ULIP investments to long-term goals only, as ULIPs tend to do far better over long periods.

Enhances Your Life Cover:

As ULIPs are life insurance plans, they always have a life cover associated with them. Thus, every time you invest in a ULIP, you also enhance your family’s financial security.

Apart from enhanced life cover, ULIPs can also provide protection for your financial goals. For example, if you are using a ULIP plan to save for the higher-education goal of your child, you have the option to ensure that your child receives the money as intended even if you are not there anymore.

The insurer pays your family the life cover amount but continues to invest as you would have done. Your child will receive the accumulated fund value at the intended maturity of the policy.

Tax-Free Returns:

While the tax saving on your investment in ULIP plans is limited to the 80C limits, you can invest any amount in the ULIPs. Even if your annual ULIP investments exceed the 80C limits the maturity value you receive can still be completely tax-free.

To ensure that your maturity proceeds do not attract tax all you need to do is invest only up to 10% of the policy sum assured in any policy year.

For example, if you start investing in a ULIP plan with a life cover of ₹20 lakh, you can deposit a maximum of ₹2 lakhs in a year and stay untouched by the tax.

Therefore, you can use ULIPs to accumulate huge tax-free wealth as well.

Adjust Investment Amount Later:

With the 10% rule of taxation, you can increase or decrease your investment amount in ULIP later. You should anyway, keep the scope open for investing a higher sum in the ULIP plan when buying without a long-term goal.

Income growth is highly likely for you, especially when you start investing early. Keeping your sum assured high will save you from the efforts of buying a new ULIP plan when your income grows,

For example, if you are 30 years of age and can invest ₹ 1 lakh a year into ULIP, you can opt for a sum assured of ₹ 15 lakhs. Thus, in future, if you want to increase your annual investment your ULIP investment will not become taxable.

Types of Funds You Can Invest in ULIPs

Here are the different funds you can invest in ULIP:

  • Equity Funds: These mostly invest in stocks and equity markets. They have greater risks and at the same time have the possibility of producing greater returns in the long run. ULIPs equity funds fit those who have high-risk appetite and set as wealth creation objectives, such as retirement corpus or education of children.
  • Debt Funds: These funds are invested in bonds, government securities, and fixed-income instruments. They are less risky than equity funds and suitable to be acquired by conservative investors who want to achieve stagnant and predictable yields during the period of their investment.
  • Balanced Funds: Hybrid or balanced funds make investments in equity as well as in debt in different ratios. They are designed to offer the characteristics of the best of both worlds, the growth exhibited by equities and the stability of the debt. Balanced funds would suit an average risk-taker seeking moderate growth in the funds.

Benefits of Staying Invested for the Long Term

Among the fundamental advantages of ULIPs is their long-term investment cycle perspective. A 10-15 year holding produces a number of positives:

  • Compounding Benefits: The longer you hold, the more your returns will increase because of the effects of compounding. Simple savings of a small amount today could accumulate to be a huge sum in the next few decades.
  • Market Volatility Smoothing: The market fluctuations are short-term, i.e., may result in the occasional decline of your portfolio in the short-term, but long-term markets tend to correct and increase. This assists you in riding through fluctuations and makes constant returns.
  • Reduced Charges with Time: Fees such as premium allocation and policy administration seem to balance themselves out in a ULIP policy as you grow your fund value on an annual basis by several years.

 

Factors to Consider Before Investing in ULIPs

  • Investment Horizon: ULIPs are also long-term oriented investments. Only purchase those when you are in a position to be holding them for at least 5-10 years.
  • Fees & Charges: ULIPs usually charge premium allocation, fund management and policy administration charges. Investigate their structure and then invest.
  • Risk Appetite: Prefer funds according to the risk that suits you. Equity funds are risky but are profitable in the long run, and on the other hand, debt funds are stable.
  • Financial Goals: Set a goal to determine if you are investing in retirement, like the education of your children or wealth creation, so that you can put money in appropriate directions.

Final Thoughts

Unit Linked Insurance Plans (ULIPs) are a powerful tool for anyone looking to build long-term wealth while ensuring their family’s financial security. They offer tax-saving benefits under Section 80C, flexibility to switch between funds, and the advantage of tax-free maturity proceeds, making them one of the most versatile investment options available today.

However, to make the most of your ULIP investment, it is essential to plan your goals clearly, choose the right sum assured, and stay invested for the long term to maximise returns through compounding.

At Canara HSBC Life Insurance, we offer a range of ULIP plans designed to help you achieve your life goals, whether it is securing your child’s future, building a retirement corpus, or creating long-term wealth, all while enjoying the dual benefits of insurance and investment under a single plan. Explore our ULIP offerings today to start your journey towards financial freedom and peace of mind.

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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