How to Select ULIP as per your salary?

How to Select ULIP as Per Your Salary?

Align your ULIP with your salary. Choose equity early on, and shift to hybrid or debt as responsibilities increase.

2025-06-01

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7 minutes read

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A Unit-Linked Insurance Plan or ULIP is a single product that offers dual benefits of insurance and investment. This ensures that you are investing in a life goal while also ensuring insurance cover that comes in handy in the future.

But how do you decide which ULIP fund to choose, especially when your income and financial responsibilities vary across career stages? Let’s understand how ULIPs work and how to align them with your salary, goals, and risk profile.

Key Takeaways

  • Your salary bracket plays a crucial role in determining how much and where to invest in a ULIP.

  • ULIPs allow you to select between equity, debt, and hybrid funds based on how much risk you’re comfortable taking. 

  • ULIPs offer free fund switching, helping you rebalance your portfolio without tax implications. 

  • For mid-level earners or those balancing income and responsibilities, hybrid ULIP funds can offer the right mix of equity growth and debt stability.

  • ULIPs provide essential life cover, making them an ideal all-in-one financial tool for salaried individuals aiming for both security and savings.

Understanding How ULIPs Work?

As an investor, you have the choice of debt, hybrid funds, and equities, among others, to invest in. The way a Unit Linked Insurance Plan works is simple. Like most insurance schemes, you would need to pay a certain amount as a premium. The insurance firm then deducts a portion of this premium towards your insurance, while the rest is invested in a range of funds.

Much like any other investment option,  you would have to assess your age, financial goals, and your aptitude and capacity for risk, apart from the investment horizon, before you start investing.

Your earning capacity at present, your opportunities for growth and the likelihood of a better income in the future all need to be assessed before you pick a ULIP. Investors come in all types: while some are low-risk/risk-averse investors, there are others who are medium risk, and a few are high-risk/aggressive investors. 

You can invest a part of your salary into one of the ULIP funds based on your risk appetite. For those with low to medium risk, investment in debt instruments may work well, while for those with a high-risk appetite, equity funds are a good option. Equity funds offer higher returns over the long-term, while those seeking stability may look at debt funds. There are also hybrid funds that an investor can look at, where there is adequate asset allocation to ensure the risks of one type of asset are mitigated by the other.

While you assess your salary, you would also need to take into account your other commitments. Depending on your ability and freedom to invest, you can pick one of the ULIP funds for investment.

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Aligning ULIP Investments with Your Salary Bracket

Your investment depends on which income level you belong to. Broadly categorising salary classes, you can consider three brackets: entry-level or beginner class, mid-level and senior executive category.

  • Entry-Level Employees: Entry-level salaries may not be very high, but on the flip side, commitments are low. You could invest in equity ULIP funds, which fetch high returns. While the risk is high, the reward is also substantial.
    But if you are an entry-level employee with a high level of responsibilities or financial commitments, you could consider a combination of equity and debt. You could think of an asset allocation fund, where the risk of one fund type is mitigated by the other.
  • Mid-Level Employees: If you are a mid-level employee, you are probably drawing an adequate level of income. The mid-income bracket can be a tricky one because you may be earning well, but also have a growing set of responsibilities and goals. You would need to balance your burgeoning responsibilities with your investment risk appetite. In such a scenario, you could look at medium risks, such as a balanced or hybrid fund. You could consider investing a portion in equity and another in debt instruments.
  • Senior Executives: If you are a senior-level executive who has a comfortable level of income as well as a safety net in the form of emergency funds, you could consider an equity fund. If you are very senior and are approaching retirement and want to look at a steady income, you could consider a debt instrument fund.
    Alongside your salary, it is important to consider your risk tolerance and preference to arrive at the right ULIP fund for investments.

Consider Risk Appetite Alongside Income

Regardless of income, risk appetite is highly personal. You might have a high income and still prefer safe investments, or a modest income with a high tolerance for risk. Use these general rules:

  • Low risk: Prioritise debt funds for capital preservation

  • Medium risk: Choose balanced or hybrid funds for moderate returns and reduced volatility

  • High risk: Focus on equity funds, ideal for long-term capital appreciation

Always evaluate:

  • Your financial goals and how far they are

  • Your ability to recover from market volatility

  • Existing savings and support systems (e.g., spouse’s income, parental support)

Premium Payment Frequency and Policy Term

You would also need to take into account the premium payment frequency and the policy term. ULIP funds offer different frequencies:

  • Annual

  • Quarterly

  • Half-yearly

  • Monthly

Depending on your salary and your ability to make payments, you can pick the annual or the monthly one. You could make use of an online ULIP premium calculator to help with the computation. One more aspect you need to consider as a salaried professional is the duration of your policy, also called the policy term. The term could be anywhere in the range of 10, 15 or 25 years, and you would need to plan your premium payments accordingly.

Use the Fund Switching Feature to Your Advantage

The biggest benefit offered in a unit-linked plan is fund switching. Even though you invest in one of the ULIP funds within a plan initially on the basis of your current salary or risk appetite, you can always switch to another fund within a plan. This option lets you exit a loss-making fund or choose a fund that is in line with your risk-taking ability and appetite. Typically, experts suggest fund switching as the investor moves towards the completion of the life goal to lower risks.

Conclusion

You can pick a ULIP on the basis of your salary and your ability and tolerance for risk. You could also choose to pay premiums on a monthly, quarterly, half-yearly or annual basis, depending on how much leeway you have in your monthly income, after taking into account your goals and other financial commitments.

ULIP plans by Canara HSBC Life Insurance offer flexibility across multiple fund options, portfolio strategies, and premium frequencies, making it easier to customise your plan as your life evolves. With features like fund switching and partial withdrawals, you gain greater control over your investments, helping you grow wealth while staying protected.

Ultimately, a well-chosen ULIP can be a smart step toward long-term financial security.

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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