Myths about Investing in ULIP Plans

IN ULIP POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER. THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR. 

Buying a ULIP (Unit Linked Insurance Plan) is one of the reliable ways to combine life insurance with long-term wealth creation. Yet, many potential investors hold back due to misconceptions and outdated beliefs about how ULIPs work. 

From assumptions about high costs to confusion about flexibility, ULIP myths can stop people from making informed decisions.  

In this blog, we’ll address common myths about ULIP plans, bust these misconceptions, and explain why ULIPs remain a relevant and rewarding investment choice today. 

Myth #1 – ULIPs Are Too Expensive to Invest In 

Reality: While older ULIPs did have higher charges, today’s ULIPs are more cost-efficient. With regulations by IRDAI, ULIP plans now come with transparent and reduced charges like fund management fees, policy administration fees, and mortality charges’.  

ULIPs now offer competitive benefits, especially when compared with the dual benefits they provide—life cover and wealth creation.  

For example, with Bandhan Life iInvest Advantage, if nothing happens to you during the policy tenure, you will get back your mortality charges' when your policy matures  

Myth #2 – ULIPs Don’t Offer Good Returns 

Reality: ULIPs offer a range of fund options—equity, debt, and balanced funds. If you invest in equity-oriented ULIPs and stay invested long-term and the market performs well, you can get strong returns. 

With options like flexi cap funds and flexibility to switch funds based on market performance, ULIPs can deliver competitive returns over the long term, especially if you stay invested beyond the 5-year lock-in. You can explore the key benefits of ULIP, such as fund-switching and goal-based investing, to maximize your growth potential. 

Myth #3 – ULIPs Are Only for Market Experts 

Reality: You don’t need to be a finance expert to invest in ULIPs. Fund management is handled by professional fund managers. You can choose from predefined portfolios based on your risk appetite—conservative, balanced, or aggressive. 

Myth #4 – You Can’t Exit a ULIP Once You Invest 

Reality: ULIPs come with a 5-year lock-in period, after which you can exit or make partial withdrawals. This lock-in helps build disciplined investing habits. 

After five years, you have complete freedom to withdraw your fund value, make switches, or even surrender the policy if needed. 

Myth #5 – ULIPs Only Provide Life Insurance, Not Wealth Creation 

Reality: ULIPs are designed to do both. While part of your premium goes towards life cover, the rest is invested in market-linked funds that help your money grow. 

ULIPs are an suitable tool for goal-based investing, such as retirement, children’s education, or wealth creation, while keeping your family protected. 

Myth #6 – Switching Funds in ULIPs Is Complicated or Costly 

Reality: Switching funds in a ULIP is typically quick, simple, and often free (up to a certain number of switches per year). Most insurers allow you to do this online or through their mobile apps. 

Fund switching gives you the flexibility to adjust your investments based on market conditions or personal goals—without exiting the plan. 

Myth #8 – There Are No Tax Benefits% in ULIP Plans 

Reality:  

ULIPs are tax-efficient investment options. Premiums paid are eligible for tax deductions under Section 80C (under old tax regime)[AS1] , up to ₹1.5 lakh per year. 

Moreover, the maturity amount is eligible for tax benefits under Section 10(10D), subject to certain conditions. This makes ULIPs a great choice for those seeking tax savings along with insurance and investment  

Conclusion 

ULIPs have evolved to become transparent, flexible, and customer-friendly investment tools. Yet, many people still hold back because of ULIP myths. 

Understanding the truth behind these common pros and cons of ULIP investment can help you make better financial decisions. If you want to grow wealth while keeping your loved ones financially protected, ULIPs are a suitable option. 

Want to know more about the best ULIP plans in India or find one tailored to your goals? Explore Bandhan Life’s ULIP offerings or consult a financial advisor to start your journey today. 

FAQs: Common Questions About Term Plans and ULIPs 

1. Are ULIPs only meant for long-term investors? 

Yes, ULIPs are well suited for long-term goals like retirement, wealth building, or children’s education. The longer you stay invested, the better your fund value growth due to the power of compounding and fund performance. 

2. Can I switch between funds in a ULIP anytime? 

Most ULIP plans allow free fund switches, usually up to a set number per year. You can switch between equity, debt, and balanced funds as per your risk appetite and market outlook. 

3. Are ULIP plans eligible for tax benefits%? 

Absolutely. You get tax benefits under Section 80C (under old tax regime only) on premiums paid and under Section 10(10D) on maturity benefits, provided all conditions are met. 

BEWARE OF SPURIOUS PHONE CALLS AND FICTITIOUS/ FRAUDULENT OFFERS!  

IRDAI or its officials do not involve in activities like selling insurance policies, announcing bonus or investment of premiums. Public receiving such phone calls are requested to lodge a police complaint. 

Bandhan Life iInvest Advantage (UIN - 138L090V01) is a unit-linked non-participating individual life insurance savings plan. Life insurance cover is available under this product. IN ULIP, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER. THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR. Unit-linked life insurance products are different from the traditional insurance products and are subject to risk factors.  

Premiums paid in unit-linked life insurance policies are subject to investment risks associated with capital markets, and NAVs of the units may go up or down, based on the performance of the fund and factors influencing the capital market and the insured is responsible for his/her decisions.  

The performance of the managed portfolios and funds is not guaranteed, and the value may increase or decrease in accordance with the future experience of the managed portfolios and funds.  

Bandhan Life Insurance Limited is only the name of the Life Insurance Company. Bandhan Life iInvest Advantage (UIN - 138L090V01) is only the name of the unit-linked life insurance contract and does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges from your insurance agent or intermediary or policy document issued by us. Life Insurance cover is available in this plan.  

For more details on risk factors, Terms and Conditions please read sales brochures and benefits illustrations carefully before concluding a sale. Issuance is subject to board-approved underwriting policy.  

Buying a Life Insurance Policy is a long-term commitment. An early termination of the policy usually involves high costs, and the surrender value payable may be less than all the premium paid.  

Various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.  

Past performance is not indicative of future performance. Please note that the fund aims to replicate the performance of benchmark index fund, subject to tracking error.  

[%] Premium Paid, Maturity Benefit, Death Benefit and Surrender Value are eligible for tax benefits subject to the conditions under Sections 80C (under OLD Regime of The Income Tax Act, 1961 only), 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor and take independent tax advice for eligibility and before claiming any benefit under the policy.   

[‘] At the end of policy term, total mortality charges including the extra mortality charges and excluding the applicable taxes would be added to the Total fund value provided all due premiums have been received.  

[*] T&C Apply. 

Bandhan Life Insurance Limited (formerly Aegon Life Insurance Company Limited), IRDAI Reg. No. 138. Corporate Identity No: U66010MH2007PLC169110. Registered Office: Bandhan Life Insurance Limited. A – 201, 2nd Floor, Leela Business Park, Andheri-Kurla Road, Andheri (E), Mumbai – 400059. Tel: +91 226118 0100, Toll Free No.:1800 209 90 90 (9 am to 7 pm, Mon to Sat), Email: customer.care@bandhanlife.com. Website: www.bandhanlife.com. ADVT -  IN ULIP POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER. THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR. 

Buying a ULIP (Unit Linked Insurance Plan) is one of the reliable ways to combine life insurance with long-term wealth creation. Yet, many potential investors hold back due to misconceptions and outdated beliefs about how ULIPs work. 

From assumptions about high costs to confusion about flexibility, ULIP myths can stop people from making informed decisions.  

In this blog, we’ll address common myths about ULIP plans, bust these misconceptions, and explain why ULIPs remain a relevant and rewarding investment choice today. 

Myth #1 – ULIPs Are Too Expensive to Invest In 

Reality: While older ULIPs did have higher charges, today’s ULIPs are more cost-efficient. With regulations by IRDAI, ULIP plans now come with transparent and reduced charges like fund management fees, policy administration fees, and mortality charges’.  

ULIPs now offer competitive benefits, especially when compared with the dual benefits they provide—life cover and wealth creation.  

For example, with Bandhan Life iInvest Advantage, if nothing happens to you during the policy tenure, you will get back your mortality charges' when your policy matures  

Myth #2 – ULIPs Don’t Offer Good Returns 

Reality: ULIPs offer a range of fund options—equity, debt, and balanced funds. If you invest in equity-oriented ULIPs and stay invested long-term and the market performs well, you can get strong returns. 

With options like flexi cap funds and flexibility to switch funds based on market performance, ULIPs can deliver competitive returns over the long term, especially if you stay invested beyond the 5-year lock-in. You can explore the key benefits of ULIP, such as fund-switching and goal-based investing, to maximize your growth potential. 

Myth #3 – ULIPs Are Only for Market Experts 

Reality: You don’t need to be a finance expert to invest in ULIPs. Fund management is handled by professional fund managers. You can choose from predefined portfolios based on your risk appetite—conservative, balanced, or aggressive. 

Myth #4 – You Can’t Exit a ULIP Once You Invest 

Reality: ULIPs come with a 5-year lock-in period, after which you can exit or make partial withdrawals. This lock-in helps build disciplined investing habits. 

After five years, you have complete freedom to withdraw your fund value, make switches, or even surrender the policy if needed. 

Myth #5 – ULIPs Only Provide Life Insurance, Not Wealth Creation 

Reality: ULIPs are designed to do both. While part of your premium goes towards life cover, the rest is invested in market-linked funds that help your money grow. 

ULIPs are a suitable tool for goal-based investing, such as retirement, children’s education, or wealth creation, while keeping your family protected. 

Myth #6 – Switching Funds in ULIPs Is Complicated or Costly 

Reality: Switching funds in a ULIP is typically quick, simple, and often free (up to a certain number of switches per year). Most insurers allow you to do this online or through their mobile apps. 

Fund switching gives you the flexibility to adjust your investments based on market conditions or personal goals—without exiting the plan. 

Myth #8 – There Are No Tax Benefits% in ULIP Plans 

Reality: ULIPs are tax-efficient investment options. Premiums paid are eligible for tax deductions under Section 80C (under the old tax regime). Moreover, the maturity amount is eligible for tax benefits under Section 10(10D), subject to certain conditions. This makes ULIPs a great choice for those seeking tax savings along with insurance and investment. 

Conclusion 

ULIPs have evolved to become transparent, flexible, and customer-friendly investment tools. Yet, many people still hold back because of ULIP myths. 

Understanding the truth behind these common pros and cons of ULIP investment can help you make better financial decisions. If you want to grow wealth while keeping your loved ones financially protected, ULIPs are a suitable option. 

Want to know more about the best ULIP plans in India or find one tailored to your goals? Explore Bandhan Life’s ULIP offerings or consult a financial advisor to start your journey today. 

FAQs: Common Questions About Term Plans and ULIPs 

1. Are ULIPs only meant for long-term investors? 

Yes, ULIPs are well suited for long-term goals like retirement, wealth building, or children’s education. The longer you stay invested, the better your fund value growth due to the power of compounding and fund performance.

2. Can I switch between funds in a ULIP anytime? 

Most ULIP plans allow free fund switches, usually up to a set number per year. You can switch between equity, debt, and balanced funds as per your risk appetite and market outlook. 

3. Are ULIP plans eligible for tax benefits%? 

Absolutely. You get tax benefits under Section 80C (under old tax regime only) on premiums paid and under Section 10(10D) on maturity benefits, provided all conditions are met.