ULIP Investment Plans in UAE

ULIPs allow you to invest in a mix of equity and debt funds, catering to different risk appetites and financial goals. With flexible premium payment options and the ability to switch between funds, they present a customisable approach to long-term financial planning. 

What is a ULIP Plan?

Short for Unit-Linked Insurance Plan, ULIP is an investment plan that blends insurance and investment. This insurance plan is designed to fulfil your long-term financial objectives. 

The premium paid towards a ULIP policy is divided into 2 parts — the first portion is directed towards life coverage and the remaining portion is directed towards market-linked investments of your choice. 

Types of ULIP Investments

ULIP plans can be categorised as follows:

Based on Fund Type

• Equity ULIPs – Invest in equity or related securities; high risk, high return potential
• Debt ULIPs – Invest in debt and fixed-income securities; low risk, steady returns
• Balanced ULIPs — Split between equity and debt for balanced risk and returns

Based on End-Use

• ULIP for Retirement – Premiums accumulate over time and the sum is paid as an annuity after retirement
• ULIP for Wealth Accumulation – Ideal for early investors seeking long-term wealth growth
• ULIP for Children's Education – Allows small withdrawals for key milestones in your child's life

Based on Death Benefit

• Type 1 ULIP – Pays either the sum assured or the fund value, whichever is higher
• Type 2 ULIP – Pays both the sum assured and the fund value; premiums are higher than Type 1

What are the Advantages of ULIPs?

Discussed below are the key benefits of ULIP plans –

• Enables Saving Habit – When you invest in such a plan, you pay a portion of your premium every month into market-linked securities. This helps in inculcating the habit of saving and investing to meet long-term financial objectives. 
• Ensures Protection – These plans offer all-round protection through a mix of life cover and investment options. This way, you are not just growing wealth but also securing your family’s financial future if something unfortunate happens to you. 
• Flexible Investment Options – When you consider investing in a ULIP investment, you control your finances. 

You can, for instance, switch between funds at any point — shift your funds from equity funds to balanced funds or vice versa. You also have the flexibility to shift your premiums to a different fund. 
Important: If you want to invest more money, you would need to top-up your ULIP plan. 

• Growth Potential – ULIP investments are popular for their growth potential. This plan enables you to invest in market instruments like debt and equity funds to grow your money. You receive higher returns to achieve long-term financial objectives. 
• A Rewarding Investment Option – The longer your funds stay invested in a ULIP policy, the more you will get bonuses like loyalty additions or wealth boosters. 

How Does a ULIP Plan Work?

A Unit Linked Insurance Plan (ULIP) combines life insurance with investment. Part of your premium provides life coverage, while the rest is invested in different funds based on your financial goals and risk preference.

If the policyholder passes away during the policy term, the beneficiary receives either the death benefit or the fund value, whichever is higher. On the investment side, the insurance company allocates 'units' based on the amount invested in market-linked funds. 

These units have a daily Net Asset Value (NAV). If the policyholder survives, the maturity amount will be the fund value of the ULIP.

What are the Features of ULIP Insurance?

The following are the features of ULIP insurance plans –

• Different Premium Payment Modes – As a policyholder, you can choose from different premium payment modes — lump sum, annually, semi-annually or monthly when investing in a ULIP insurance plan. 
• Dual Benefit – With a ULIP investment, you get the benefit of both life insurance and market-linked investments. As mentioned earlier, a portion of the premium gets invested towards life cover while the remaining part is invested in market-linked securities for higher returns on investment. This removes the hassle of getting separate plans for insurance and investment.
• Transparency – ULIPs are transparent investment instruments. As a policyholder, you get regular performance updates about your investments. This keeps you updated and helps in making informed decisions. 
• Lock-in Period – Most plans have a lock-in period where you cannot surrender or withdraw their funds for a minimum tenure. The lock-in period helps in long-term investment and facilitates wealth creation with time. 
• Flexibility in Fund Selection – These plans enable you to select funds that you wish to go ahead with. You can align the investments to your goals and risk appetite. 
• Market-linked Returns – An attractive feature of ULIP insurance is that it offers market-lined returns. A part of the premium gets invested into debt, equity, or a mix of both. This helps in controlling the market exposure and can help in capital appreciation. 

What are the Funds under ULIP Plans?

You can opt for any of the following types of funds —

• Hybrid Funds — Hybrid funds in ULIPs combine equity and debt investments, offering a balanced approach to risk and returns. These funds allow you to benefit from equity market growth as well as stability through debt instruments. This makes them ideal for those seeking moderate risk and capital appreciation.
• Equity Funds — Equity funds focus on stocks, offering high potential returns for investors with a higher risk appetite. They are more volatile but can significantly grow wealth over the long term.
• Balanced Funds — Balanced funds mix equity and debt to balance risk and growth. Such funds are ideal for investors seeking moderate returns with stability.
• Liquid Funds — Liquid funds invest in short-term, highly liquid instruments, providing quick returns and low risk. They're great for short-term goals or managing surplus funds.

How to Increase Your Returns from a ULIP Plan?

Here are some straightforward steps to maximise your returns from a ULIP —

• Start early — Starting your ULIP policy early gives your money more time to grow. It also helps reduce the impact of short-term market fluctuations. Plus, since the plan also includes life insurance, starting early ensures your loved ones are covered.
• Invest regularly — Consistent investing builds a larger amount over time, leading to better returns. Set up automatic premium payments to keep your plan active.
• Use fund options wisely — ULIPs offer equity, debt, and balanced funds. Switch between them based on market conditions and your risk tolerance to optimise returns.
• Review your portfolio — Regularly check your investments and adjust as needed. This will help you switch funds or increase your investments for better returns.

Who Should Invest in a ULIP Plan?

Anyone over the age of 18 years can invest in a ULIP policy. This type of investment opportunity is suitable for those who want decent returns on investment and minimum life cover. 

Some ideal investors are discussed below –

• People Seeking Long-Term Investment Opportunities – ULIP investment is suitable for those who are looking for long-term investments. Note that such plans usually have a lock-in period of 5 years. 
• Individuals Who Want Fund Management – As discussed above, these plans are transparent investments and offer investors flexibility to manage their funds. You can set a ratio of funds you wish to allocate to equity and debt. You also have the flexibility to select the funds for your basket and how much money you want to assign to the funds. 
• People Who Know Their Risk Appetite – If you are aware of your risk appetite, ULIP plans are suitable investments for you. You can change your equity and debt investment ratio as per your risk profile throughout the policy duration. 
• People at Different Life Stages – ULIP insurance is suitable for people who are at different life stages and have different needs and financial objectives. 

What are the Pros and Cons of ULIP?

Listed below are the pros and cons of ULIP plans — 

What Should You Consider Before Selecting a ULIP Plan?

Keep the following things in mind before selecting a ULIP investment plan in the UAE — 

• Choose a plan based on your risk tolerance. If you’re comfortable with higher risks, invest in equity funds. However, if you prefer safer options, go for debt funds.
• Understand all ULIP charges, including mortality, policy administration, fund management, and premium allocation fees, before investing.
• Check the cost and ease of fund switches in the plan, and whether any free switches are allowed yearly.
• ULIPs offer flexibility with 3 payment options: single, limited, or regular. Choose the one that suits you for long-term commitment.
• Align your plan with your financial goals such as children's education, marriage, or lifestyle needs.

Where Should You Buy a ULIP Insurance Plan in the UAE?

You can easily buy ULIP investment plans in the UAE on Policybazaar.ae. 

This third-party aggregator houses the best ULIP plans from the leading providers in the country. Moreover, with its user-friendly interface, you can easily find the best plan as per your needs in a few clicks. 

When you buy a plan from us, you get the following benefits —

• Flexibility to compare and select a plan suitable for your needs
• Round-the-clock customer assistance
• Free access to your credit score
• Assistance from industry experts if you are confused about the plans

Frequently Asked Questions