Top ULIP Investment Trends In 2025

Top ULIP Investment Trends in 2026

ULIPs have evolved with ROMC, lower charges & tax perks, making them a smarter, flexible investment option for wealth growth & protection.

Written by : Knowledge Centre Team

2025-07-21

2777 Views

12 minutes read

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Whether you invest or not, you must have heard of Unit Linked Insurance Plans or ULIP. These unique investment-cum insurance products have come a long way in India. Before getting into trends and updates, let us have a look at what a ULIP actually is.

Key Takeaways

  • ULIPs offer dual benefits: a life insurance cover and market-linked investment.
  • Return of Mortality Charges (ROMC) ensures that mortality costs deducted during the policy term are refunded at maturity, improving returns.
  • Tax advantages include deductions under Section 80C and tax-free maturity under Section 10(10D), if specific conditions are met.
  • ULIPs offer high flexibility through fund switches, premium redirection, and partial withdrawals after the 5-year lock-in period

What is a ULIP?

In a ULIP, a part of the premium is utilised for a life cover, while the other part is invested in various market funds chosen as per your risk appetite and investment horizon. ULIPs are unique not just in their structure but also in terms of returns. On one hand, you have the security of a life cover, which will provide for a payout in the event of your death. At the same time, you can also grow your wealth with steady returns from your investments.

Trends in ULIPs

As an investment option, ULIPs have faced a rollercoaster of a journey. Here’s a look at the major ULIP trends from the past year.

1. ROMC ULIPs

One of the main concerns with ULIP investments earlier was that the life insurance cover would eat into one’s investment returns. This concern was addressed by insurers offering a return of mortality charges. Mortality charges are basically the charges that your insurer deducts for providing you the life cover. A lot of insurers have begun a practice wherein the total amounts of mortality charges deducted are added back to the fund value upon maturity.

What are mortality charges in ULIP?

2. Exemption from LTCG tax

In Budget 2018, a Long Term Capital Gains Tax was introduced on stocks and equity funds. ULIPs, being insurance tools, were spared from this tax only under specific conditions. The proceeds do not incur tax if the annual ULIP premiums are within Rupees 2,50,000 and satisfy Section 10(10D) of the Income Tax Act. This gave them an edge over mutual funds, ELSS, and a lot of other investment options. This, coupled with ROMC, only gave ULIPs an edge not just as tax-saving instruments, but also as investments offering good returns.

3. Income Tax Benefits 

The tax benefits are available under Section 80C of the Income Tax Act. As per Section 80C, individuals get a maximum exemption of Rupees 1,50,000. Also, the maturity benefits are tax-free. The benefit is applicable if the death benefit is at least 10 times the annual premium. If the condition is not met, the tax benefits fall to 10% of the assured sum.  

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4 Reasons to Invest in ULIPs

ULIPs are more flexible and more promising. Especially if you are a new investor, they can be a great place to begin with the right balance of potential returns and safety of investments.

  1. A ULIP offers you the best of both worlds- investment and insurance. It eliminates the need for handling two different instruments at once.
  2. It is very easy to switch and redirect your investments with a ULIP. You can switch them almost anytime you feel like your chosen fund is not performing well or is too risky or too safe.
  3. Although ULIP investments are ideally long-term investments, you can exercise partial withdrawals when you are in urgent need of funds. This only adds to the flexibility of ULIPs.
  4. They are great for long term financial goals like education, buying a house, marriage, etc.
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Did You Know?

Starting April 1, 2026, any ULIP policy with annual premiums over ₹2.5 lakh will be subject to tax on the returns earned.

Source: Upstox

ULIP

Conclusion

ULIPs have evolved. What once seemed like a complex, charge-heavy product is now a streamlined, investor-friendly option. It offers protection, returns, and tax savings under one umbrella. ULIPs give you the flexibility to switch funds, enjoy long-term growth, and stay protected. So, if you are aiming for long-term goals like your child’s education or a dream home, it might be time to give ULIPs a serious look.

Glossary

  1. Market Sentiment: The overall mood or tone of investors in the market, driven by news or emotions, influences buying and selling.
  2. ULIP Schemes: A financial product combining life insurance and market-linked investments with tax benefits.
  3. Portfolio: A mix of financial assets like stocks, bonds, and funds owned by an individual to grow wealth or manage risk.
  4. Equity: An ownership share in a company, often purchased as stocks, offering growth potential but with higher market risk.
  5. Debt Funds: Investments primarily in fixed-income securities like government or corporate bonds, ideal for stable, low-risk returns.
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Uncertain About Insurance

FAQs

The fund value of ULIP refers to the total premium value invested in various funds. The formula to calculate it is as follows: 

Fund Value = Total Number of units under a policy x Net Asset Value

Since ULIP has a 5-year lock-in period, you are eligible for a tax deduction on the premium only if you have paid it for 5 consecutive years. 

Yes! According to Section 112A of the Income Tax Act, if you hold a ULIP with a premium of less than ₹2.5 lakhs for more than a year, you will have to pay 12.5% tax on the profits during withdrawal. This will come under the head Income from Capital Gains. However, you can get an exemption of up to ₹1.25 lakhs annually under Long Term Capital Gains. 

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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