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ULIP: A Good Investment Product Unfairly Judged For Its Charges

Joan MathewsJoan Mathews06 June 2019

Are the charges associated with ULIPs putting you off from this investment route? Here’s the good news - insurance companies have come out with 4G ULIPs that have far lower charges and offer additional benefits.

Ulip Plans

Looking to grow your wealth and secure your finances at the same time? Well then, ULIPs are the best investment option for you. These are insurance cum investment products where you’ll get a risk cover and the option to park your money in any number of qualified investments like stocks, bonds or mutual funds. ULIPs have been in the market for a while now. They provide a good alternative to a number of investment plans, since it contains the component of insurance. However, there have been instances where people have been skeptical about opting for this route on account of the charges involved. Taking a note of this concern, insurance companies have created a new variant of ULIP, termed as 4G ULIP.

What is 4G ULIP?

4G ULIPs are more flexible in nature as compared to traditional ULIPs, and they can be availed at a lesser cost. The fund management charge on such investment plans can range from 0.95% for debt funds to 1.35% for pure equity funds. Additionally, they have features like zero premium allocation charge, zero policy admin charge and the mortality cost of the life cover may be returned to you at the time of maturity.

Previously i.e. the first couple of years since the launch of ULIPs, the costs associated with this investment plan were on the higher side. However, these costs have been brought down drastically over the last few years. This has mainly been attributed to the product regulations that came about in 2010 and 2013, and also to a certain extent by the competition in the marketplace as well as the emergence of digital channels. Now, thanks to the introduction of 4G ULIPs, the overall costs of the investment plans are in the range of 1.5% to 1.6%. The new age ULIPs are being presented as products that can help investors/policyholders achieve their financial goals through disciplined investing, market linked returns and lower charges.

Benefits of Investing in ULIP Plans at an Early Age

If you think that a 4G ULIP is the right product for you, then the next step is to move towards investing. A big mistake that people often make is putting off this decision for a later date. To grow your wealth, you need to give it sufficient time. With 4G ULIP plans, the sooner you start investing, the more time your hard-earned money will have to grow. Following are some of the benefits of investing inULIP plansat an early age:

  • Power of compounding: Compounding refers to reinvesting of income for the purpose of generating additional income over time. Under ULIPs, the money that you invest gets compounded. By continuously reinvesting your earnings, your return on investment grows exponentially. Needless to say, compound interest will help make the money that you invest grow at a faster rate as compared to simple interest. To help facilitate this wealth creation, ULIPs have been designed with a lock-in period of 5 years and the option to stay invested for relatively long periods of time.

  • Systematic savings habit: When you begin investing towards a ULIP plan right after landing a job, you are essentially inculcating a habit of saving at an early age. This, in turn, will help reduce the burden of a higher monthly or yearly contribution towards your life goals in the later phase of your life.

  • Better risk appetite: If you have just started out in your career, you are most likely to be free from liability in terms of dependents and therefore have the potential for higher risk appetite. In other words, you can opt for funds with higher exposure in equities. While more equity would mean more risk, you also have the opportunity to earn higher returns. Equities tend to outperform most of the other asset classes over the long term.


If the cost element is what’s holding you back from investing, then you definitely must give 4G ULIPs a try. They have been designed particularly to address the price concerns that people have. As seen above, a number of charges have been removed altogether while others have been reduced drastically.

ULIPs are a unique investment product - they offer the benefit of life insurance and wealth creation through investments in stocks and bonds. Currently, the market is flooded with ULIP products. To find the best ULIP plan, make sure to compare the products on the basis of their features, benefits and costs. Take a call on which ULIP plan to avail based on the product’s ability to meet all your needs the best.

Recommended Read:How Beneficial It Is To Invest In ULIP?

Joan Mathews
Written by Joan Mathews
Joan has over 4 years of experience writing for the BFSI industry. She enjoys watching mystery TV series, listening to 80s classics and spending time with her furbabies.