ULIPs for Legacy Planning: Are You Overpaying?
ULIPs combine life insurance with market-linked investments and can help pass wealth to your family. But high charges and long lock-ins mean you must compare carefully before buying one.
A ₹10,000/month ULIP premium buys you insurance + investing — but charges can quietly eat ₹1.2L over 5 years.
Your ULIP money stays locked longer than most Indians realise
Key Takeaways
Compare the Internal Rate of Return (IRR) of your ULIP against a pure term plan + SIP combination before buying.
Check your ULIP's fund management charge (FMC) — IRDAI caps it at 1.35% per year; anything higher is non-compliant.
Review your existing ULIP's annual statement to see how much of your premium is going into insurance vs. actual investment.
ULIPs combine life insurance with market-linked investments and can help pass wealth to your family. But high charges and long lock-ins mean you must compare carefully before buying one.
Here's what happened: ULIPs (Unit Linked Insurance Plans) offer both a life cover payout and equity or debt market growth in one product.. After a mandatory 5-year lock-in, partial withdrawals are allowed — but surrender charges can apply if you exit early.. IRDAI rules now cap ULIP charges, but total cost including mortality, fund management, and admin fees can still exceed 2–3% annually..
What you should do: Compare the Internal Rate of Return (IRR) of your ULIP against a pure term plan + SIP combination before buying.. Check your ULIP's fund management charge (FMC) — IRDAI caps it at 1.35% per year; anything higher is non-compliant.. Review your existing ULIP's annual statement to see how much of your premium is going into insurance vs. actual investment..
A ₹1 crore term plan costs roughly ₹12,000–₹15,000/year for a 35-year-old. Invest the premium difference in SIPs — you'll likely build more wealth with better liquidity than any ULIP offers.
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This article is reported by GoCredit's Editorial Team based on the source above. GoCredit synthesises, contextualises, and adds India-borrower-relevant analysis. We are not the original publisher.