Are Investment Returns Guaranteed in a ULIP

Are Investment Returns in a ULIP is Guaranteed?

Explains whether ULIP returns are guaranteed, how market-linked funds impact returns, and when limited guarantees may apply in certain ULIP plans.

Written by : Knowledge Centre Team

2025-12-02

956 Views

8 minutes read

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Various Types of Investment Options

Guarantee is an attractive word, especially when you want to give your money for something. For example, you’d prefer an LED TV with a 5-year guarantee over another with just a 2-year guarantee. Similarly, the investment world is also made up of two different investment options:

  1. Guaranteed Investments
  2. Market Linked Investments

The main point of difference between them is the returns guarantee. However, this single word makes all the difference in their usage, characteristics and benefits.

While guaranteed investments announce their minimum rate of return at the beginning, marketing linked investments leave the returns to the time. If you pay attention guaranteed investments only guarantee the return with a specific investment term.

For example, a five-year fixed deposit may give a 7% p.a. rate of return if you stay invested for five years. If you withdraw early, your ROI declines. On the other hand, market-linked investments can help you build wealth over time.

However, market-linked investments produce ROI based on the market performance of the assets. ULIP is one such market-linked investment. Thus, while ULIP returns are not guaranteed, you can stay invested in ULIPs for a long time and multiply your savings growth.

guaranteed investments vs market linked investments

How does ULIP Work?

Unit Linked Investment plans provide you with life cover and at the same time allow you to invest and earn returns in the market. ULIP investments work in the following steps:

  1. Premium Payment: You need to pay your ULIP premium in annual or monthly instalments. You can also select quarterly or half-yearly payments if allowed in the plan. This premium amount is usually up to 10% of the life cover sum assured in the plan.
  2. Allocation of Premium: In certain ULIPs 100 per cent of your premium is allocated to the investment funds.
    • Premium will go to the investment funds you have selected, i.e., equity, debt, balanced or liquid funds.
    • You can fix the allocation ratio to different funds or select an investment strategy to manage the allocation.
    • Each fund will allocate units as per the NAV and the amount allocated to it.
  3. Deduction of Charges: ULIP includes certain charges. These are deducted as per the policy. Charges in the ULIP plan generally include:
  4. Investment Returns: ULIP plans have two ways of returning your investment:
    • Growth in Fund Value: So far as you stay invested in the ULIP funds your money continues to grow. You may also receive bonus additions if you invest within the due time and for a long period. All this leads to the growth of your invested funds which you can withdraw from the plan or receive at maturity.
    • Death Benefit: ULIP Plan also offers a life insurance cover. Thus, If you die during your policy term then your family members will receive the death benefit sum assured. It can be the fund value or the sum assured, whichever is higher.

For example, if your 20-year ULIP plan has a sum assured of Rs 20 lakhs and a death claim occurs in the fifth policy year, your family will receive Rs 20 lakhs. However, if the claim occurs in the 15th policy year when your fund value is 30 lakhs, they will receive Rs 30 lakhs as the death benefit.

How to Get Guaranteed Returns in ULIPs?

Though the returns of a ULIP are not certain, the features it offers can help you get healthy and steady returns with low risk. Here’s how

1. Invest in Liquid Funds

Liquid funds are the funds under which your money is invested in money market instruments or debt funds. These involve little to no equity contribution and have high liquidity.

Liquid funds help you to earn stable returns at a relatively lower risk. 40-100% of the sum is invested in debt instruments. Thus these funds have high security and help you generate constant returns.

2. Use Automated Portfolio Management

ULIPs offer you multiple policy management options to help generate great returns.

The policy includes 4 different strategies that you can choose from. These strategies manage your fund automatically and ensure that you do not have to be involved much.

3. Invest in Debt Funds

Debt funds in ULIP plans invest in top-rated fixed income securities. Meaning, the return on these securities is fixed and they have a high credit rating. Although investing in debt funds may not offer as high a return as equity funds over the long horizon, the returns are very stable.

Thus, you can ensure minimum guaranteed returns from debt funds in the ULIP plan.

Click Here to Use ULIP Calculator

Additional Benefits of Using ULIP

Now we have learned that despite being a Market-Linked instrument, ULIPs can give you steady and stable returns thanks to their host of features. By making use of the strategies available, you can try to manage your risk effectively and ensure that your returns are guaranteed.

But, that’s not all, ULIPs have more to offer than these strategies.

Keep your family’s wealth goal secured with Premium Protection Option.

By buying the care option, you can have the advantage of this benefit. If you have opted for this option and die during the policy, then the remaining premiums are waived off. All the future premiums will be paid by the insurance company itself. Your policy will continue as it was supposed to be, even after your death.

At the time of your death, your family will receive the death benefit immediately. At the time of maturity, your family will get the maturity value. This ensures they achieve all their goals.

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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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