Glossary term
ULIP
Insurance product that bundles a life cover with market-linked investment. Usually inferior to buying term insurance + mutual funds separately.
Unit-Linked Insurance Plans (ULIPs) bundle a life insurance cover with a market-linked investment component. A portion of the premium goes to the life cover; the rest is invested in funds chosen by the policyholder.
ULIPs typically have higher costs than term insurance + mutual funds and lock you in for 5 years. The 80C and tax-free maturity benefits used to be a draw, but recent tax changes (premium > ₹2.5L/year loses tax-free maturity) have reduced even that advantage. Most experts recommend buying pure term insurance separately and investing the difference in mutual funds.