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Top 5 ULIP Myths That Stops You To Invest

ulip myths

Are you one of those investors who scared to invest in Unit Linked Insurance Plans because of some ULIP Myths?

These ULIP myths not only stops you but many people choose not to invest in ULIP. People are actually scared to invest in Unit Linked Insurance Plans as many misconceptions are surrounding them.

In fact, ULIP is one of the robust insurance plans which people misunderstood, as ULIP myths are hovering over them.


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You may be having doubts about the usefulness of these plans. Eventually, you may either end up taking these policies or surrender before its maturity.

ULIP myths are happened just because of the mis-selling of these policies in the lure of high commissions for distributing them.

As a result of ULIP myths, people don’t consider these insurance products. So, you might also continue to misunderstand about ULIP’s purpose, pricing, returns, and other features.

ULIP actually gives you dual benefits by offering you investment and insurance. You need to understand the product features and benefits first.

So, it is important for you to debunk unit-linked insurance plans myths.

Here are some ULIP myths surrounding for a long time now which are actually not true. So, you need to avoid these myths in order to get the benefit of insurance and investment.

ULIP Myths: Unit Linked Insurance Plans are costly

ULIP was expensive prior to the intervention of IRDAI. It was costly because a major chunk of your premium has been taken as charges. These charges include policy administration, premium allocation, and to manage the funds.

Initially, these charges have been ranging around 6 to 10 per cent. However, now you’ll charge only 1.5 to 2 per cent. Even, all other administrative charges are also eliminated.

So, you can consider ULIP as economical insurance products. In fact, you can remain invested for long-term that offers you awesome returns along with insurance.

Moreover, you can also have the option of partial withdrawal after lock-in period without paying an extra penny.

Low returns on investment

You may be sceptical before investing in ULIP because it provides a low return on your investment. However, besides investment, it also provides you with an insurance cover.

It provides you dual benefits and so you cannot compare it with other investment options. Considering these awesome dual benefits, the returns are extremely lucrative and competitive.

Furthermore, if you remain invested for long-term then you can expect optimal returns from the stock market. So, you can invest in ULIP without worrying about returns.

ULIP myths: highly risky to invest

One of the most heard ULIP myths is that it is very risky to invest as it is linked with the equity markets. However, with Unit Linked Insurance Plans, you can choose or invest based on your risk level.

Depending upon your risk appetite, you can opt for different funds like equity, balanced or debt funds. Moreover, your insurance cover will remain fixed in a ULIP.


So, ULIPs are not that risky as you might know it. Your hard-earned money will be invested or allocated to funds depending upon your risk. Moreover, you have the option to switch your funds depending on the volatility of the market.

Stock market affect the insurance cover

It is one of the common ULIP myths that your insurance cover is affected because of market volatility. However, the truth is the life cover remains unchanged irrespective of market ups and downs.

ULIPs are linked to the stock market, so you may think that the sum assured would also go down if the market crash. It is just another misconception that has been surrounding for many years.

Whether the market is bullish or bearish, your insurance cover will not get affected. Unit Linked Insurance Plan is a great product that covers your family and also helps your money to grow in the long run.

Your insurance company is liable to pay you the promised life coverage or fund value, whichever is more in case of death of the insured party. So, it is a myth that the equity market volatility impacts your insurance life cover.

The exit plan is not easy

It is a misconception that after buying a ULIP, the exit plan is not so easy. In fact, you can surrender your policy after the lock-in period which is of 5 years.

You can withdraw full value before the policy matures and there will be no surrender or exit load charges. However, it is better for you to remain invested for the long-term to get maximum benefits.

So, you need to debunk all these ULIP myths which are not true.

Are there any other myths associated with Unit Linked Insurance Plans?

You can share your views in the comments section.

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Published on: Mar 27, 2019

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