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Is It Beneficial to Invest in ULIPs? Top Tips to Get Better Returns from ULIP

Is It Beneficial to Invest in ULIPs? Top Tips to Get Better Returns from ULIP

With the immense advancement in technology, our purchasing behavior has changed drastically. Buying anything, be it clothes, accessories, electronics, etc. has become easier and more convenient than ever. You can just browse through the options, check designs, read reviews and pick the one that suits your requirements. While we proactively choose products that best compliment ourselves, why not plan our investments in the same way? In today's day and age, investment is a critical aspect for each of us as it secures our financial future and opens a door of opportunities.

While there are numerous investment plans and options available, it is often confusing to determine an option that justifies our needs. However, one ideal instrument to secure our financial future is ULIP. Let's understand the benefits and importance of ULIP investments.

ULIP or Unit Linked Insurance Plan is considered as an ideal choice for investors who are looking for a reliable investment option to generate wealth in the long run. This investment-cum-insurance plan is also one of the best tax-saving options. So, here are some tips that will help you make the most of your investment, have a look :-

  • Choose between debt and equity funds - Your risk appetite plays a very important role while making a choice between debt and equity funds. Each asset class has different characteristics when it comes to risks and returns. For instance, equity funds are known for high risk and high returns while debt funds are known for low risk and low return value. Thus, if you can withstand risk, then go for equity funds. But, if you want your investment plan to be less risky, then go for debt funds.
  • Understand your life goals - You must identify your goals before you begin investing, as it plays a very important role in deciding your risk appetite. Thus, you can make a list of your life stage requirements. By this way, you will get to know how much you need to invest in a ULIP or Unit Linked Insurance Plan so as to meet your financial goals.
  • Optimize fund allocation - This strategy plays a very significant part in determining the risk to return ratio. As ULIP allows you to invest money in different asset classes that saves you from big losses. With ULIP investment plan, you can easily switch from one fund to another as per their performance.
  • Stay updated with the market trend - You must stay updated with the latest market scenarios. If you think equity market is suddenly expensive, then you can switch to a different fund and get back when the situation gets normal.
  • Know the charges - Before investing in ULIPs, it is important to know the charges linked with them, as this will give you an idea on how to invest money in one or more fund because charges in ULIPs differs from one plan to another.
  • Stay invested for a longer time - You need to have patience while investing in a ULIP. If you want to generate wealth, then you need to invest in ULIPs for a longer period of time. Apart from this, you need to be aware of the prevailing market trends so that you can switch between funds as per your investment needs. This will help you take an informed decision.
  • Buy ULIP online - It is beneficial to buy ULIP online as there are no charges involved and will cost you less. You can score the best ULIP if you are well aware of the market trends. One more reason to buy ULIP online is that you can compare various ULIP schemes offered by different insurance companies. The best part about buying ULIP online is that there's no policy administration charges which automatically reduces its cost.
  • Flexibility in premium payment option - You should look for a ULIP that offers flexibility when it comes to premium payment option. For example, some insurance companies offer single premium payment option while some offer regular premium payment option (same as that of policy term).

On the whole, these above mentioned tips will make the most of your ULIP investment by offering guaranteed returns with minimum losses. Besides, for those who are planning to invest in ULIP, choose to go with Invest 4G ULIP by Canara HSBC OBC Life Insurance; this plan offers 7 different types of funds as well as 4 portfolio strategies to invest your money.

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Annual Income (In Lacs)


In order to understand ULIP NAV, you first need to understand how ULIPs work. In ULIPs, a portion of premium from different investors is accumulated to create one investment corpus. This money is invested in several different market instruments. So to divide the returns properly among all the investors, the fund manager divides the net asset value in to small units with a specific face value. NAV is the per market share value of a fund. To better understand the definition of NAV, take a look at the formula below -

Net Asset Value = [Assets-(Liabilities + Expenses)] / Outstanding Units

It's not risky to invest in ULIP if you chose a safer path. Risk factor in ULIPs depends on the investment option you choose. If you are not okay with sharp movements, then choosing a low risk investment is a better idea. For people with high risk appetite, it's good to choose equity funds while risk-averse investors can go for debt funds.

You can opt for settlement option if you want to take your fund value in periodic installments. With the settlement option, you can get your maturity amount in installment as per the frequency chosen by you over a maximum period of 5 years. You can choose complete withdrawal of fund value at any point of time. Although, you will not get any life cover during this period.

ULIPs are life insurance products that provide paths to invest. And just like other investment option, there's no guaranteed investment return in a ULIP. Although, if you like taking risks and want to earn more returns on your investment, then opt for equity funds.

At the time of maturity of ULIP policy, you will get the fund value on your prevailing NAV. Fund value is the number of units of policy multiplied by NAV (net asset value).

Value of the fund = Total units of policy x NAV (Net Asset Value)

Well, discontinuing your premium payment will disrupt your savings as well as financial goals. In such case, you can approach your insurance company and ask for the revival of discontinued policy within the stipulated timelines. Also, you will have to pay all the unpaid premiums.

ULIP plan is a combination of investment and insurance. Thus, one must hold this plan for a duration of at least 10 years so as to get investment benefits out of it. As an early exit will have its own consequences. ULIPs have a lock-in-period of 5 years. Thus, you may surrender your policy before the completion of 5 years, but you will be paid only after the end of 5 years.

Generally, minimum lock-in period for ULIP is 5 consecutive policy years. During this time period, if the policyholder discontinues or surrenders the policy, then he/she will not able to receive any payouts. Withdrawals are only allowed at the end of the lock-in period. In addition to this, if you surrender your policy before the lock-in period ends, then you will have to pay surrender charges as well. Also, it is advisable not to exit your plan after the completion of 5 years of lock-in period, because if you stay invested for a longer duration it will help you reap better benefits.

The amount that you pay towards the Unit Linked Insurance Policy is eligible for tax deduction as per Section 80C of the Income Tax Act, 1961. This means that the premium amount paid will be deducted under section 80C from your taxable income up to a maximum limit, which is currently ₹1.5 Lakhs. However, the aggregate amount of deductions under section 80C, section 80CCC and 80CCD (1) shall not, in any case, exceed ₹1.5 Lakhs. Also, upon the maturity of the policy, the payout amount you receive will be exempt from income tax, subject to the applicable provisions of Section 10(10D) of the Income Tax Act, 1961.

Here’re the following major benefits of buying ULIP

1. Tax Benefits – It helps you to reduce tax liabilities. This means you are liable to enjoy tax benefits on the premiums paid towards the policy as per Section 80C of the Income Tax Act.

2. Long-term growth– One of the major benefits of buying a ULIP plan is that it offers long-term benefits. ULIPs come with a lock-in period of 5 years which will keep you invested for a longer period.

3. Dual benefits – ULIPs not only offer life coverage but also come with a wide range of investment funds that will help you earn great returns. This includes balanced funds, debt funds or equity funds. You can invest in any of them depending on your need and risk appetite.

4. Flexibility – It gives you the flexibility to switch between funds basis your risk appetite. You could select multiple funds and different investment strategies.

5. Partial withdrawal option – It allows you to make partial withdrawal in case of any uncalled medical emergency or contingency after completion of lock-in period.

ULIP is a perfect investment option if you are looking for long term wealth creation. It could be buying your own house, a new car, going on a long vacation, or your child’s higher education or marriage, ULIP helps you to meet all your long-term financial goals. Moreover, it comes with a lock-in period of 5 years which keep you invested for a longer period and helps you earn better returns. The lock-in period is calculated from the date when the policy is issued.

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