Types of Investment funds under ULIP - Greyfont

Types of Investment funds under ULIP


Unit Linked Insurance Plan or ULIP is a amalgamation of insurance along with investment under roof offered by insurance companies. They provide life cover to the policy holder and helps in investing through mutual funds, stocks, liquid funds etc..ULIPs are the plans that invest in the stock market through growth and equity schemes. The investment depends on the investors choices. Policy holder are given units for the premium invested. The hard earned money by the investor is invested for attractive returns. There are various schemes that suits your needs. The investments are long term so, the needs may be long term like retirement life plan, children marriages, a foreign tour etc... ULIPs assure high returns on investments. These investments are subjected to market risks.


More on ULIPs

The lock in period was earlier 3 years which has now increased to 5 years. The charges are equally distributed in the lock in period of ULIP. The amount you pay is invested in funds that the investor chooses to. It may be in equities or low risk government bonds. Administration charges , fund management charges , premium allocation charges, partial withdrawal charges are deducted from the premium. Policy holder gets units for the amount invested. The premiums paid avail tax benefits. The income earned from these investments are also tax free. 


Types of investment funds under ULIP

  • Cash Funds - These are the low risk funds. Low risk means low returns. They are commonly known as Liquid Funds. The investment is directed towards bank deposits, treasury bills.
  • Equity Funds - these are large and medium investment risks. The investment by ULIPs is majorly in company stocks and equities. Equity Funds are the riskiest investment. The investor should be risk ready.
  • Balanced Funds - these investments are medium to high risk. They are also known for its stable form of investment. The premium amount is invested in company bonds and stock market which are high risk and low risk, fixed income instruments.
  • Fixed Interest and Bond Funds - these ULIPs are known as medium risk investments. Insurance companies invest in debt funds or government bonds.


Benefits -

  • Flexible investments - The investor can switch between funds to match his needs. If you are ready to take risks and wish high returns, equity option is the one you should think about. In case of low risk, an investor can choose to invest in debt funds. Partial withdrawal facility is available but it may attract charges. The facility of top up gives the investor to increase the premium.
  • Transparency - You can always keep an eye on your portfolio. A dedicated fund manager is allotted who keeps the track of your investments in addition giving you the flexibility of change in funds. This gives the investor an idea on how his money is managed.
  • Rider Options - the Unit Linked Insurance Plans offer additional cover in the form of riders. Term rider, critical illness rider to name a few. They come at a nominal fees or charges. They add benefits to your existing policy.
  • Savings Habit- if you need a corpus amount in future ULIPs help you to inculcate the saving habit right from the beginning.
  • Stages of life - Depending at what stage of life you are in you can choose the plan that fulfill your financial liabilities. There is no age concern.
  • Tax Benefits - the premium paid, maturity benefits are eligible for tax benefit under Section 80C as they are life insurance products. The returns on maturity are exempted under Section 10(10D).


Firstly, under the concept of ULIP. Compare different plans from various insurance companies. Risk bearing factor should be given importance. Unit Linked Insurance Plan(ULIP) is one of the best tax saving option. Go through the dotted lines very carefully . Make a wise decision.


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