Do ULIPs offer guaranteed returns?

If you’ve landed on this page, you are probably trying to find out which investment and insurance options work for you. In this article, we will briefly explore what ULIP insurance is and answer the question, “Do ULIPs offer guaranteed returns?”


What is a ULIP policy?

Unit Linked Insurance Plan or ULIP is a life Insurance policy. One of the biggest ULIP benefits is that it is an investment and an insurance policy, both, in one financial product. That’s the reason why ULIPs are popular – they offer life cover and an opportunity to create wealth.

As with any insurance policy, you are required to pay premiums for ULIP insurance. When your insurer receives your premium, they allocate a part of it to your protection policy and the other part of it is invested in various types of funds.

Where is your money invested?

To understand the kind of returns ULIP policies offer, and whether they are guaranteed, it’s essential to understand where your money is going to be invested first.

The insurer will give you the option of choosing the type of fund you would like to invest your money in, based on your financial goals and risk appetite. Your investment options are either debt-oriented financial instruments or equity-oriented financial instruments.

Investors who prefer to minimise risk may be more comfortable with debt fund investments, while those that are looking for higher potential returns are better off with equity funds.

Any investment in market-oriented funds performs based on the market’s overall performance.

For those that are looking to balance potential returns and safer investments, spreading your investment across both these fund types is also an option your insurer will give you in the form of balanced funds.

Investors have the option of choosing what kind of funds their hard-earned money should be invested in. The top insurers always have reliable advisors to help you make the right choice.

Are the returns guaranteed?

Like with all other investment products, no, the ULIP returns are not guaranteed. However, the flexibility and transparency offered along with the other ULIP benefits make it a great long-term investment option.

Another advantage of ULIP policies is that your insurer provides you with the option of switching where your money is invested. Some specific terms and conditions have to be met when switching. Switching allows investors to try out different types of funds based on the performance of the markets and meet their changing financial goals.

This is ideal for anyone who is investing over a medium to long period, as you generally would with life insurance. During your youth, you are less likely to have major financial commitments. This allows the investor to choose investment options that are slightly less risk averse.

As you mature, your appetite for risk will likely mellow out and investors can choose more risk-averse investment options.

What are the reasons to choose ULIPs?

  • Two-pronged benefits

It is both an insurance policy and an investment fund.

  • Tax deductions

You may be eligible for tax deductions under certain sections of the Income Tax Act, 1961. The returns you earn on your ULIP policy will not be subject to long-term capital gains tax if the premium paid is not above Rs 2.5 lakh per annum. Due to the introduction of the new tax regime and the recent revisions to which instruments attract tax benefits and their limits, it’s advisable to consult your financial advisor or insurer.

  • Potentially better returns than other options

ULIP policies have the potential to offer higher returns since the returns on the equity component are market-linked. However, this is subject to market fluctuation.

  • Choice of investment types

Investors can choose the type of funds they want to invest in and decide to switch when they desire, depending on the terms and conditions the policy is bound by. So, if your current investment isn’t doing well, you have the option of switching to a different one.

  • Transparency

There isn’t a lot of a grey area here. The charges you will have to bear are all mentioned upfront, and the top insurers always keep their clients updated about their investments.


ULIPs are insurance policies that give investors channels to invest their money and attempt to make a return on the investments. ULIPs do not offer guaranteed returns. Despite returns not being guaranteed, investors can keep careful tabs on their investments. Insurers will provide them with detailed reports of how their investments are performing. Investors then have the choice of investing in different funds. Hence, ULIPs do make for a good long-term investment.