ULIP Calculator
Understand ULIPs in India for 2025. Learn how Unit Linked Insurance Plans combine investment and insurance, their benefits, charges, and tax savings under Section 80C. Make a smart choice with MyExcellentScore.
ULIP : Frequently Asked Questions (FAQs)
A ULIP has a mandatory lock-in period of five years. You cannot fully surrender or withdraw the policy amount before this period ends.
What is the lock-in period for a ULIP?
No, the investment component of a ULIP is linked to the market, so the returns are not guaranteed. They depend entirely on the performance of the funds you have chosen.
Are ULIP returns guaranteed?
The maturity proceeds are tax-free under Section 10(10D) if the aggregate annual premium of all ULIP policies issued on or after February 1, 2021, is up to ₹2.5 lakh. If the premium exceeds this limit, the returns are taxed like capital gains.
Is the maturity amount from a ULIP always tax-free?
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Yes, ULIPs allow for partial withdrawals after the 5-year lock-in period to meet emergency financial needs. The terms and conditions for withdrawals vary between insurers.
Can I withdraw money from my ULIP for an emergency?
What is a ULIP?
A Simple Guide to Unit Linked Insurance Plans (2025)
Choosing where to put your money can be confusing. Should you buy insurance to protect your family or invest in the market to grow your wealth? What if you could do both with a single product?
Enter the Unit Linked Insurance Plan (ULIP)
A ULIP is a hybrid financial product that offers the dual benefits of life insurance and market-linked investments. It's designed for people who want to create wealth over the long term while ensuring their family has a financial safety net. At MyExcellentScore, we believe understanding these tools is the first step to a better financial future.
How Does a ULIP Work?
Think of a ULIP like a financial combo meal. You pay a single price (the premium) and get two main items: a life insurance cover and an investment component.
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You Pay a Premium: You decide to pay a certain amount annually, semi-annually, or monthly.
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Premium is Split: A small portion of your premium is used to provide you with a life insurance cover. This is called the mortality charge.
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Investment in Funds: The remaining amount is invested in market funds of your choice—similar to mutual funds. You can choose from equity funds (for high growth), debt funds (for stability), or hybrid/balanced funds (a mix of both).
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Units are Allotted: Based on the fund's price (called Net Asset Value or NAV), you are allotted "units." The value of your investment grows or falls depending on the performance of these funds.
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Key Features and Benefits of ULIPs
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ULIPs have evolved over the years to become a more transparent and investor-friendly option. Here’s why they are popular for long-term goal planning.
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Dual Advantage: Insurance + Investment
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The core benefit of a ULIP is that it bundles two crucial financial needs into one. You get a life cover to protect your loved ones in your absence and market-linked returns that help your money grow and beat inflation.
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Flexibility to Switch Funds
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Your financial goals and risk appetite can change over time. ULIPs offer the flexibility to move your money between different funds (e.g., from equity to debt) a certain number of times each year, often for free. This allows you to manage your investment risk without exiting the policy.
Key Features and Benefits of ULIPs
ULIPs have evolved over the years to become a more transparent and investor-friendly option. Here’s why they are popular for long-term goal planning.
Dual Advantage: Insurance + Investment
The core benefit of a ULIP is that it bundles two crucial financial needs into one. You get a life cover to protect your loved ones in your absence and market-linked returns that help your money grow and beat inflation.
Flexibility to Switch Funds
Your financial goals and risk appetite can change over time. ULIPs offer the flexibility to move your money between different funds (e.g., from equity to debt) a certain number of times each year, often for free. This allows you to manage your investment risk without exiting the policy.
Tax Benefits
ULIPs offer significant tax advantages:
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Section 80C: The premiums you pay are eligible for tax deductions up to ₹1.5 lakh per year.
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Section 10(10D): The maturity amount you receive is tax-free, provided the total annual premium for all your ULIPs does not exceed ₹2.5 lakh.
Long-Term Wealth Creation
ULIPs come with a lock-in period of 5 years, which encourages disciplined investing. This long-term horizon allows you to benefit from the power of compounding, where your returns start earning their own returns, leading to substantial wealth creation.
Understanding ULIP Charges
Transparency in charges is crucial for a good financial score. Modern ULIPs regulated by IRDAI have a clear and capped fee structure. The primary charges include:
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Premium Allocation Charge: A percentage deducted from your premium upfront. Many new-age online ULIPs have zero allocation charges.
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Fund Management Charges (FMC): A fee for managing your chosen funds, capped at 1.35% per annum.
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Mortality Charges: The cost of providing the life insurance cover, deducted monthly.
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Policy Administration Charges: A fixed monthly fee for the upkeep of your policy.
Always read the policy document to understand the charges before investing.
How Does a ULIP Work?
Think of a ULIP like a financial combo meal. You pay a single price (the premium) and get two main items: a life insurance cover and an investment component.
-
You Pay a Premium: You decide to pay a certain amount annually, semi-annually, or monthly.
-
Premium is Split: A small portion of your premium is used to provide you with a life insurance cover. This is called the mortality charge.
-
Investment in Funds: The remaining amount is invested in market funds of your choice—similar to mutual funds. You can choose from equity funds (for high growth), debt funds (for stability), or hybrid/balanced funds (a mix of both).
Units are Allotted: Based on the fund's price (called Net Asset Value or NAV), you are allotted "units." The value of your investment grows or falls depending on the performance of these funds.
Disclaimer
About ULIP Calculator
The information on this website regarding Unit Linked Insurance Plans (ULIPs) is for educational purposes only and should not be construed as financial advice. ULIPs are complex instruments subject to market risks, and returns are not guaranteed, as the investment value can fluctuate based on fund performance. Prospective investors should perform their own due diligence by carefully reviewing all official policy documents and consulting a qualified financial advisor to determine suitability based on their personal financial objectives and risk tolerance.