How Flexible are Unit Linked Insurance Plans?

How Flexible are Unit Linked Insurance Plans?

ULIPs allow you to stay in control, switch funds, skip premiums, or withdraw partially without breaking your plan.

2025-09-03

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8 minutes read

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“It’s better to bend than to break” is an age-old saying that perfectly captures the essence of flexibility. In both life and financial planning, the ability to adapt can make all the difference. When it comes to investments, Unit Linked Insurance Plans (ULIPs) stand out as one of the most versatile and flexible options available in the Indian market.

In this ever-changing world, flexibility is more important than ever, not just in our personal and professional lives, but in how we manage our money. Let’s explore how ULIPs offer flexibility and why they’re an ideal choice for long-term wealth creation.

Key Takeaways

  • ULIPs offer unmatched investment flexibility, allowing you to switch funds, choose premium terms, and withdraw partially.

  • Tax benefits under Sections 80C and 10(10D) make ULIPs highly tax-efficient.

  • With ULIPs, you can make partial withdrawals after the lock-in period to get access to funds when needed without compromising your long-term investment goals.

  • If the policyholder dies, future premiums are waived, and the policy continues. This helps in securing the maturity benefit for your loved ones.

  • ULIPs offer complete transparency in fund allocation, charges, and investment performance.

What is Meant by Flexibility in Investment?

Flexibility in investment means having the ability to make changes to your plan according to your financial goals, life changes, and market movements. It’s about choosing where and how much to invest, when to withdraw, and how to access benefits over time. 

An investment must cover the following things to be called ‘flexible’:

  • Freedom to Switch Between Assets: An investment should give you an opportunity to switch between the assets you invest in. At the start of an investment, you are given options to choose from many asset classes, including equity, fixed instruments, real estate, etc.

It is natural that in a long-term investment, you would not want to stay invested in one fund throughout. As you move on with your goals, you might need to shift your funds as well. A flexible investment will help you do so.

  • Invest Anytime: A flexible investment gives you the option to invest as you like and not only a single time. Different people have different professions and have different payment capabilities. For example, if you are a salaried individual, you would prefer to pay regularly. On the other hand, if you have a seasonal business, you would like to pay upfront for the whole policy.

Thus,  flexible investment considers these and gives you options to invest at your convenience.

  • Withdraw Money when Needed: Withdrawal facilities go a long way in determining the flexibility of an investment, especially when the investment is for the long term. A flexible investment allows premature withdrawal.

The ability to withdraw from your funds is necessary to meet emergencies, as they do not come with notice and can occur anytime. To cater to such obstacles, you may need funds.

Withdrawing money from your fund will make sure that you do not have to borrow or take a loan from the bank.

  • Term of Investment: The term of an investment describes the period for which you will invest in a particular instrument or option. A flexible investment allows you to choose the term you want, instead of having a fixed tenure.

A different individual can possess different goals. Every goal requires a different time. Thus, investment tenure should be flexible so that you can align your term with the wealth goal you want to achieve.

Investment Flexibility in Unit Linked Insurance Plans

Unit Linked Insurance Plans, or simply ULIPs, are one of the most flexible investment plans in India. This is one investment that you can use for almost all important financial goals in your life. Whether you want to invest safely to build a specific corpus in five years or want to have a great retirement in 30 years, ULIP can do it all.

The flexibility concept in Unit Linked Insurance Plans looks something like the following:

  1. Choose Your Asset Class in Funds: Most of the investment plans  limit you to one or two asset classes, often without giving you the freedom to choose where your money goes. ULIP plans, on the other hand, offer you multiple asset classes that you can invest in. Some of the options offered include:

    • Equity
    • Debt
    • Balanced Funds
    • Liquid Funds
      You have the full freedom to choose where to invest.
  2. Dynamic Fund Allocation: In ULIPs, it is not necessary that you have to select one fund to invest in. You are given the flexibility to invest in more than one fund at a time. Yes, ULIP allows you to allocate your money to different funds.

    You can choose to allocate different proportions of your premium to different funds. For example, 50% to equity, 50% to debt.

  3. Flexible Premium Payment Term: The Premium Payment Term, or the PPT, is the duration for which you are required to pay your premiums. ULIPs provide you with multiple ways in which you can pay your premium.

    You can choose one of the following ways:

  4. Benefits Payout Options: There are two major benefits that are present in the ULIP plan. These are
    • Maturity Benefit
    • Death Benefit

      The majority of the investments present in the market provide these benefits in a lump sum, especially the death benefit. But with ULIP, you can receive your benefits in a lump sum as well as in instalments.
  5. Systematic Withdrawal: You can partially withdraw your funds before your policy matures in ULIP. However, you can make use of a partial withdrawal only when the lock-in period of the policy is completed and you have attained the age of 18. 

Why Are ULIPs a Smart Investment Choice?

Flexibility is undoubtedly the hallmark of ULIPs, but there’s more that these plans offer. Wondering what? Keep scrolling through to explore the benefits in detail:

  1. Transparency: ULIP is the most transparent investment option currently in the market. It shows you how your premium is allocated, in which assets it is allotted and in what proportion.It also shows you the full list of charges that are deducted, along with the amount as well.

  2. Bonus Additions: It offers the following bonuses

    • Loyalty Additions
    • Wealth Boosters

      These additions occur after 5 years of commencement of the policy. A % of your fund value is added to your existing fund as a bonus.
  3. Tax Benefits: ULIPs also offer attractive tax advantages, making them a smart choice for tax-saving investments:

    • Maturity Benefit (Section 10(10D)):
      • For ULIPs issued before 1st February 2021, the entire maturity amount is tax-free, regardless of the premium paid.
      • For ULIPs issued on or after 1st February 2021, the maturity amount is taxable under the head ‘Capital Gains’ if the total annual premium exceeds ₹2.5 lakh.

    • Death Benefit: In all cases, the amount received by the nominee on the policyholder’s death is fully tax-exempt under Section 10(10D), regardless of the premium or policy date.
  4. Wealth Creation: ULIP is perfect for investors who have a long-term horizon in mind. With ULIP, you can create a huge corpus for yourself in the long run.

    You have the flexibility to choose any of the 4 strategies.

    • Systematic Transfer Option (STO)
    • Return Protector Option (RPO)
    • Auto Funds Rebalancing (AFR)Switch Option (SSO)

      These strategies work in a pre-defined manner and help in the creation of wealth. These make sure the policy works in the way you want, without too much involvement.
  5. Goal Protection Feature: ULIPS ensures that your financial objectives are met even in your absence. Here’s how:

    • Your policy will continue to run even after your death
    • The remaining premium will be waived off and will be taken care of by the company
    • At the end of the policy, your family will receive the maturity benefit
      This feature ensures that the ultimate goal gets fulfilled and the family does not have to worry about the premiums.

Conclusion

Flexibility in ULIP plans can make your money work harder if invested right. All you need is to find a way to keep your money invested for another few years. Another aspect of ULIP flexibility you should aim to use is portfolio management strategies. These strategies are extremely helpful in managing your investment risk when you invest in equity funds.

But to truly unlock the full potential of a ULIP, choosing the right insurance provider matters just as much as the plan itself. Canara HSBC Life Insurance offers a range of feature-rich ULIP plans designed to suit various life stages and goals. With a trusted legacy, robust digital tools, and a strong customer-first approach, we offer ULIPs that stand out for their flexibility and value. Additionally, Loyalty Additions and Wealth Boosters reward long-term commitment, helping your wealth grow faster.

So, why not take advantage of these features to grow your money?

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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