ULIP - Unit Linked Insurance Plan

The full form of ULIP in insurance is Unit Linked Insurance Plan. A ULIP is a market-linked life insurance policy in which the investible portion of the premium, after applicable charges, is allocated to funds that may invest in equity, debt or a mix of both. In simple terms, the ULIP meaning combines long-term investment choices with life cover in one policy.

The amount you receive at maturity depends on the fund value (current value of your investment) at that time. Since ULIP returns are linked to market performance, they are not guaranteed¹.

ULIP at a Glance

A ULIP has a five-year Lock-in period, market-linked fund options, life cover and a defined policy term. It can also provide fund switching, partial withdrawals after the Lock-in period and tax treatment subject to applicable conditions. The table below summarises the main ULIP features before the page explains each one in detail.

Note:

The type, amount and timing of charges vary across ULIP. Refer to the policy brochure, benefit illustration and policy document before buying.

Medical tests or additional documents may be required depending on the applicant’s age, health, occupation, life cover, premium and information provided in the proposal form.

For ULIPs issued on or after February 1, 2021, tax exemption on maturity proceeds is subject to the aggregate annual premium across eligible ULIPs not exceeding ₹2.5 lakh and fulfilment of the other conditions prescribed under the Income-tax Act. Death benefits remain exempt subject to applicable tax provisions.

A ULIP combines life insurance with market-linked investment. When you pay the premium, applicable charges are deducted and the remaining amount is invested in the fund or funds selected by you. Your investment is converted into units, and the value of those unit's changes with the fund’s NAV.

The Two Parts of a ULIP

• Life insurance: A part of the premium provides life cover during the policy term.
• Investment: The amount available for investment is used to buy units in market-linked funds. The value of these units can rise or fall depending on fund performance.

ULIP returns are market-linked and are not guaranteed¹ unless a specific guaranteed benefit is provided under the selected product.

A ULIP can remain in force for many years, so the insurer’s financial strength, claims record, investment-management capability and disclosure practices matter alongside product features.

The suitable Bajaj Life ULIP plan depends on your financial goal, time horizon, life-cover requirement, premium budget and the type of investment flexibility you want. The table below helps narrow the choice by matching each plan to the customer priority it is designed to address.

The suitable ULIP for you is the one that fits your financial goal, investment horizon, risk appetite, life-cover need and ability to continue the premium. Compare plans on the factors below rather than choosing only on recent returns or one product feature.

Fund performance should be compared over a suitable period and against the relevant benchmark. The table below shows representative Bajaj Life ULIP funds across equity, hybrid and debt categories.

Should You Choose the Best ULIP Plan Based on High Returns?

No. The suitable ULIP plan should not be chosen only by the fund with the highest recent return. Compare the fund with its benchmark over suitable periods, check the level of market risk, review charges and choose a plan whose fund range and policy features match your goal. Past performance does not guarantee future returns.

Returns and AUM as on 31 July 2026. Returns above one year are CAGR. Small Cap Fund and Flexi Cap Fund had not completed five years as of this date. Past performance is not indicative of future performance.

View All Fund Performance of Bajaj Life

You can buy a Bajaj Life ULIP by choosing the financial goal, plan, premium, funds and investment strategy, then completing the proposal, KYC and underwriting requirements. The exact documentation or medical requirement depends on the proposal and selected cover.

1. Define the goal and choose the ULIP plan. Compare the policy structure, life cover and features with the financial goal and time horizon.
2. Choose the premium, payment frequency, premium-paying term and policy term that you can sustain.
3. Select the available ULIP funds and investment strategy based on risk appetite, equity-debt allocation and preferred level of control.
4. Submit the proposal form and provide the required personal, financial and policy-related information. Pay the applicable premium as per the proposal process and instructions.
5. Complete KYC, documents and any medical, tele-medical or verification requirement requested for underwriting.
6. Bajaj Life assesses the proposal based on the information and documents submitted and completes the applicable underwriting process. The proposal is processed as per the applicable underwriting guidelines, and the policy is issued on acceptance of the proposal, subject to the approved terms and conditions.

ULIPs can be useful for investors looking to build wealth over the long term while maintaining life insurance protection. Their value comes from the combination of investment flexibility, insurance, tax treatment and long-term discipline.

A ULIP may suit a long-term goal when you can accept market risk and maintain the required premium. Suitability depends on the goal, investment horizon, liquidity needs and risk appetite.

ULIP plans can offer fund choice, fund switching, premium redirection, partial withdrawals after the Lock-in period, top-ups, flexible premium options, life cover and selected loyalty or protection features. The exact features depend on the plan.

The exact features, limits and charges vary by plan and should be checked in the product brochure and policy document.

Related guides: top-up premium in ULIP | ULIP riders

A ULIP is one of several ways to plan for a long-term goal. The useful comparison is not whether one product is universally better, but how each option differs on return certainty, access to money, portfolio flexibility and the role it can play in your financial plan.

ULIP vs FD, PPF, NPS, Mutual Funds and Other Options

No single long-term product is better for every financial goal. A ULIP offers market-linked fund choice and policy-level switching, while an FD prioritises certainty, PPF prioritises government-backed long-term saving, NPS focuses on retirement and mutual funds provide pure market-linked investment. Compare the job each product needs to perform before choosing.

ELSS: Equity-Linked Savings Scheme | SIP: Systematic Investment Plan | PPF: Public Provident Fund | NPS: National Pension System

The suitable option depends on the job the money has to do. A customer may also use more than one product-for example, term insurance for high life cover and separate investments for other goals.

Are ULIPs Better Than FD?

A ULIP and a fixed deposit serve different needs. An FD is generally more suitable when capital certainty and a predetermined interest rate are the priority. A ULIP may be considered for a long-term goal when someone needs life cover as well as accepts market risk and wants equity or debt fund exposure.

ULIP vs Mutual Fund: What Changes When You Rebalance?

Consider an investor with ₹10 lakh in equity who wants to move ₹4 lakh to debt and later move the money back to equity. The market decision can be identical, but the transaction and tax mechanics are different.

Internal tax treatment is a feature of ULIP rebalancing, not a reason to switch frequently. Rebalancing should be based on your goal, time horizon and risk capacity rather than short-term market predictions.

What Happens to a Long-Term Goal if the Investor Dies?

The important question is not only what is paid on death, but what happens to the financial goal after that payment. The answer differs depending on how the goal has been structured.

A ULIP without a continuation or waiver feature should not be presented as automatically protecting future contributions. Always check the selected product’s death-benefit and continuation provisions.

Related guides: ULIP vs SIP | ULIP vs PPF | ULIP vs NPS | ULIP vs endowment plan | ULIP vs Mutual Funds | ULIP Vs. Fixed Deposit

ULIPs can be classified based on where the money is invested, the goal being planned for, how premiums are paid, the death-benefit structure and the type of solution required.

The exact fund options, premium-payment terms, life cover, guarantees and benefits vary by product.

ULIP plans offer different fund options based on how much investment risk you are comfortable taking and how far away your financial goal is. Depending on the plan, you can invest in one fund or divide your money across multiple funds.

For equity funds, companies are commonly grouped by market capitalisation: the total market value of a company’s shares. The Nifty broad-market indices classify companies within the Nifty 500 universe into large-cap, mid-cap and small-cap segments.

Bajaj Life’s existing ULIP fund universe includes funds such as Bond Fund, Debt Plus Fund, Liquid Fund, Accelerator Mid-Cap Fund II, Equity Growth Fund II, Asset Allocation Fund II and Blue Chip Equity Fund.

ULIP Funds Based on Investment Style

Equity funds can also differ based on how stocks are selected.

Active Funds vs Index Funds

ULIP funds can also be classified by how the portfolio is managed.

Can You Invest in More Than One ULIP Fund?

Depending on the plan, you can divide your investment across multiple funds.

For example, if your accumulated ULIP fund value is ₹10 lakh, you may choose to keep ₹4 lakh in a large-cap fund, ₹2 lakh in a mid-cap fund, ₹1 lakh in a small-cap fund and ₹3 lakh in a debt fund.

You can also change this allocation later through fund switching or premium redirection, subject to the selected plan terms.

The appropriate fund mix depends on your financial goal, investment horizon and ability to handle changes in market value. Higher return potential generally comes with higher investment risk. ULIP fund returns are market-linked and past performance does not guarantee future returns.

Choosing a ULIP fund should not be based only on which fund delivered the highest recent return. The right choice depends on your financial goal, risk appetite, existing investments, time horizon and the characteristics of the fund itself.

Choosing the Suitable ULIP Fund

Choose a ULIP fund by matching the fund’s risk, asset class and investment style to your financial goal and time horizon. Recent return alone is not enough. Compare long-term performance with the relevant benchmark, understand how much the fund can fluctuate and check whether the allocation complements investments you already hold.

Past performance can help assess consistency but does not guarantee future performance. When reviewing fund history, compare performance with the relevant benchmark rather than looking only at standalone returns.

Which ULIP Investment Strategy Should You Choose?

Some ULIPs allow you to select and manage funds yourself, while others offer strategies that automatically change the allocation according to predefined rules.

Important: Under strategies other than an Investor Selectable Portfolio Strategy, the choice of funds may be limited to the funds and allocation options available under the selected strategy. The exact fund options and switching or transfer rules depend on the ULIP and its policy terms.

Quick decision guide

• Assume you pay a ₹10,000 monthly premium for a goal 15 years away.
• If you are comfortable selecting funds and monitoring your portfolio, you may use an Investor Selectable Strategy and decide your own equity-debt allocation.
• If you want higher equity exposure in the early policy years, with equity exposure gradually reducing as the years to maturity decrease, a Wheel of Life / Lifecycle Strategy may be suitable.
• If you want your portfolio to automatically rebalance according to predefined market movements, you may consider a Trigger-Based Strategy.
• If you have money that you want to move into equity gradually rather than at one time, an Auto Transfer Strategy may be relevant.
• If protecting the accumulated corpus becomes more important than pursuing higher growth, a Capital Preservation-Oriented Strategy may be considered where available.
• The strategy should therefore be chosen based on how much control you want, how much risk you can take, how far away your goal is and whether you want the allocation to be managed manually or automatically.
• Fund selection and portfolio strategy should support a long-term financial plan rather than be used only to predict short-term market highs and lows.

A ULIP may be suitable for individuals seeking life insurance protection along with market-linked wealth creation for long-term financial goals. Since ULIPs have a five-year lock-in period, they are generally better suited to those who can stay invested for longer horizons, such as 10, 15, 20 or 25 years.

When Is the Right Time to Invest in a ULIP?

The right time to invest in a ULIP is when you have a long-term financial goal, can sustain the premium and have enough time to accept market fluctuations. Starting earlier can provide a longer investment horizon, but age alone should not drive the decision. Liquidity needs, life cover, risk appetite and existing investments also matter.

It is particularly relevant in the following situations:

A ULIP is therefore primarily a long-term wealth-creation product with an insurance layer around the financial goal. It can be particularly useful when the goal is linked to dependants and needs to be achieved even in the individual’s absence.

A ULIP is designed primarily for long-term wealth creation with market-linked investments. It may not be suitable in the following situations:

A ULIP should therefore be considered when the money can remain invested for the long term. Short-term liquidity, pure life-cover needs and the need for fully guaranteed returns should be evaluated separately.

A ULIP is a regulated life insurance product, but that does not mean the investment value is guaranteed. The money invested in ULIP funds is market-linked, so the fund value can rise or fall with the performance of the underlying investments.

What Does “Safe” Mean in a ULIP?

Safety in a ULIP has two separate dimensions: the insurer’s ability to meet policy obligations and the market risk of the investment funds. Regulatory safeguards, solvency requirements and fund-management rules support the insurance framework, but they do not remove market risk. The value of equity, debt and hybrid funds can still rise or fall.

The safety of a ULIP therefore comes from understanding what is protected and what is market-linked. Life insurance benefits are governed by the policy terms, while the investment value remains exposed to the risks of the selected funds.

How ULIPs Have Evolved?

ULIPs have evolved from relatively conventional market-linked insurance products into more flexible solutions for wealth accumulation, regular income and higher protection.

These developments mean a ULIP can now be designed around three different needs: accumulating wealth, converting accumulated wealth into regular income, or combining market-linked wealth creation with substantially higher life protection.

When Can a ULIP Be a Good Investment?

A ULIP can be a good long-term investment when it is used for what it is designed for - long-term market-linked wealth creation with an insurance layer around the financial goal. It should not be treated as a guaranteed investment simply because it is an insurance product. The investment outcome ultimately depends on the funds selected, market performance, charges, investment period and how the portfolio is managed.

Related guides: is ULIP a good investment? | ULIP advantages and disadvantages

A ULIP has a mandatory Lock-in periodof five years from the start of the policy. During these five years, the money invested cannot be withdrawn completely or partially. If the policy is discontinued during this period, the amount is handled under the applicable discontinuance rules and becomes payable after the Lock-in period, subject to the policy terms.

The Lock-in period does not prevent you from managing how the money is invested. You can switch between available ULIP funds during the Lock-in period, subject to the terms of the selected plan.

Why the Five-Year ULIP Lock-in period Matters?

Equity can be volatile over short periods. A five-year Lock-in period does not make market-linked returns safe or guarantee a profit. It does, however, create a minimum investment horizon and reduces the ability to exit a long-term plan because of short-term market movements.

Withdrawal Restrictions Across Long-Term Products

ULIPs are not the only long-term financial product with restrictions on early access. The form and duration of the restriction differ by product.

These restrictions are not equivalent. They show that several long-term products limit immediate access in different ways. For a ULIP, five years is only the minimum Lock-in period; the appropriate holding period should be based on the financial goal.

For historical rolling-return evidence, see “How Are ULIP Returns Calculated?”

Stopping premiums and surrendering a ULIP are not the same thing. What happens also depends on whether this occurs during or after the five-year Lock-in period.

Discontinued Policy Fund Explained

The Discontinued Policy Fund is a separate fund where the value of ULIP policies discontinued during the Lock-in periodis held until it becomes payable. Only fund management charges apply to this fund. The current regulatory cap on the fund management charge for a Discontinued Policy Fund is 0.50% per annum, and the fund earns at least the minimum interest rate prescribed by the regulator from time to time.

ULIP Discontinuance Charges

Discontinuance charges can apply during the early policy years and are capped by IRDAI. The maximum permitted charge reduces with each policy year and is nil from the fifth policy year onwards.

The exact outcome can vary by product, premium-payment structure and policy terms. Tax consequences of surrender are covered separately in the ULIP Tax section.

Related guides: ULIP renewal | cancel a ULIP plan

ULIP charges vary by product. Not every ULIP levies every charge, and newer online ULIPs may have lower charges under some heads. When comparing plans, it is important to look at the overall impact of all applicable charges, not just one charge in isolation.

Main ULIP Charges

ULIP charges are deducted for different purposes, including life cover, fund management and policy administration. The exact charge structure varies by product, and some plans may have nil charges under selected categories. The right comparison is not just the name of each charge, but its combined impact on the policy’s long-term return.

Charges That Apply Only in Certain Situations

Some ULIP charges apply only when a specific event occurs, such as discontinuing the policy, using a chargeable withdrawal or adding an optional rider. These charges should be checked separately from regular policy charges because they may never apply to every policyholder. Product documents specify the amount, timing and applicable limits.

Impact of ULIP Charges on Returns

IRDAI limits the Reduction in Yield (RIY) of a ULIP. Reduction in Yield means the difference between the gross investment return and the effective net return after applicable charges.

For example, for a policy term of 15 years or more, if the gross yield used for illustration is 8% p.a., the difference between the gross yield and net yield cannot exceed 2.25 percentage points per annum.

This does not mean every ULIP costs 2.25% per year. A lower-charge ULIP may have a much lower Reduction in Yield.

Note: Mortality, Morbidity, Cost of rider benefits, Investment Guarantee, Tax on charges (as applicable) and extra premium due to underwriting emanating from extraordinary health conditions is excluded in the calculation of the net yield 

Example: Reduction in Yield in a Bajaj Life ULIP

Consider an actual Bajaj Life Goal Assure IV illustration with a ₹20,000 monthly premium, ₹2.40 lakh annualised premium, a 20-year policy term and an 8.00% p.a. illustrated gross yield.

In this illustration, the difference between the 8.00% gross yield and 6.87% net yield is only 1.13 percentage points per annum.

A few important points from this illustration:

• Premium allocation charge is nil.
• Policy administration charge is ₹4,320 in Year 1, ₹6,000 per year from Years 2 to 10, and nil thereafter.
• The illustration also includes loyalty additions³, a maturity fund booster³ and return of mortality charges⁴, subject to policy terms.

This shows that the actual Reduction in Yield of a Bajaj Life ULIP can be substantially lower than the regulatory maximum.

Comparing ULIP Charges

Do not select a ULIP just because one charge is low. Instead, compare the overall effect of all applicable charges, including premium allocation charge, policy administration charge, fund management charge, mortality charge, guarantee charge if any, and rider charge if any.

The benefit illustration helps show how these charges affect the projected fund value over the policy term.

GST on ULIPs

From 22 September 2025, individual life insurance policies, including ULIPs, are exempt from GST. This reduces the tax burden on individual ULIP policies, but it does not remove the underlying policy and fund charges described above.

Related guides: ULIP plan charges | mortality charges in ULIP

ULIP taxation depends on when the policy was issued, the annual premium, the life cover and the type of amount received. A qualifying ULIP can provide tax-exempt policy proceeds, while gains from a non-exempt ULIP can be taxable under capital-gains provisions. Tax treatment should therefore be checked at purchase and again before a withdrawal, surrender or maturity receipt.

If you are searching for Section 10(10D): under the earlier Income-tax Act, 1961, eligible life-insurance proceeds were commonly discussed under Section 10(10D). Under the Income-tax Act, 2025, the corresponding exemption framework is contained in Section 11 read with Schedule II Sr No.2.

ULIP ₹2.5 Lakh Tax Exemption Rule

For relevant ULIPs issued on or after 1 February 2021, the aggregate annual premium across applicable ULIPs should generally be ₹2.5 lakh or less for the policy proceeds to qualify for tax exemption. The annual premium should also generally not exceed 10% of the actual capital sum assured; a 15% limit applies to specified special policies, subject to the statutory conditions¹

For example:

Since the combined annual premium is ₹2.16 lakh, it is within the ₹2.5 lakh threshold. Other applicable conditions must also be met for the proceeds to be tax-free.¹

If the combined premium crosses ₹2.5 lakh, it does not necessarily mean every ULIP automatically becomes taxable. Which policy proceeds qualify for exemption must be determined under the applicable aggregation rules.²

How to Claim ULIP Tax Benefits

If you use the tax regime that permits the Section 123 deduction, include the eligible life-insurance premium in the relevant deduction schedule while filing the income-tax return and retain the premium receipt and policy details as supporting records. The deduction is subject to the overall ₹1.5 lakh limit and the applicable premium-to-sum-assured conditions.

Tax-Free vs Taxable ULIP Proceeds

A ULIP can be tax-free or taxable depending on the policy issue date, annual premium, sum assured and the type of amount received. Qualifying policy proceeds can receive exemption, while gains from a non-exempt ULIP can fall under capital-gains taxation. Internal fund switching does not by itself mean the policyholder has received taxable proceeds.

For a ULIP that does not qualify for the life-insurance exemption, the Income-tax Act treats profits or gains arising when amounts are received from the ULIP as capital gains.

ULIP tax at a glance

Money moving inside the ULIP is generally not the point at which tax arises.

Fund growth, switching, premium redirection, becoming paid-up or revival generally do not create an immediate tax liability because the policyholder has not received policy proceeds.

Tax becomes important primarily when money comes out of the ULIP: through maturity, surrender or partial withdrawal. Whether that receipt is tax-free or taxable depends on whether the policy qualifies for the applicable exemption

Death benefits under normal individual life insurance policies are generally treated separately and remain exempt, subject to the provisions of the Income-tax Act.

ULIP Tax Rule Changes and Existing Policies

Recent life-insurance tax changes have applied from specified policy-issue dates. For example, the ₹2.5 lakh annual-premium condition applies to relevant ULIPs issued on or after 1 February 2021; that particular threshold was not applied retrospectively to ULIPs issued before that date.

Historical treatment should not be read as a promise that every future tax change will protect existing policies. Tax treatment depends on the law and transitional provisions applicable to the policy and the amount received.

Tax Notes & Disclaimers

Tax exemption conditions: For ULIPs issued on or after 1 February 2021, the aggregate premium for relevant ULIPs in any tax year during their term should generally not exceed ₹2.5 lakh. The annual premium should also generally not exceed 10% of the actual capital sum assured. A 15% limit applies to specified special policies. These conditions are prescribed under with Section 11(read with Schedule II, S.No.2) of the Income-tax Act, 2025.

Multiple ULIPs: The ₹2.5 lakh limit is an aggregate limit across applicable ULIPs, rather than a separate ₹2.5 lakh allowance for every policy. Where aggregate premiums exceed the threshold, exemption eligibility must be determined in accordance with the applicable Income-tax provisions and CBDT guidelines.

Premium deduction: Eligible life-insurance premiums can form part of the deduction available under Section 123, subject to the applicable tax regime and conditions (available only if opted for old tax regime). The aggregate deduction under Section 123 cannot exceed ₹1.5 lakh. The amount of premium eligible for deduction is also subject to the prescribed premium-to-sum-assured limits.

Events within the policy: Fund switching, premium redirection, fund-value growth, additions to the fund, paid-up status and revival do not by themselves involve receipt of policy proceeds by the policyholder. Accordingly, these events do not by themselves trigger the receipt-based ULIP capital-gains provision. This treatment follows from Section 67, which taxes gains arising from receipt of an amount under a non-exempt ULIP.

Withdrawals and surrender: Schedule II provides exemption for qualifying sums received under a life insurance policy. Where the ULIP does not qualify for that exemption, profits or gains arising from amounts received are subject to the capital-gains provisions. The tax computation may therefore depend on the policy’s tax status and the applicable prescribed calculation method.

Non-exempt ULIPs: Where the life-insurance exemption does not apply, Section 67 provides that profits or gains arising from amounts received under the ULIP are chargeable under Capital Gains. The precise amount taxable and applicable rate depend on the prevailing capital-gains provisions and characteristics of the ULIP.

Death benefit: The premium-to-sum-assured and ₹2.5 lakh conditions applicable to the exemption of relevant life-insurance proceeds do not apply where the amount is received on death. Other statutory exclusions, including Keyman insurance policies, continue to apply.

Settlement and other benefits: Where policy benefits are paid in instalments or under settlement options, their tax treatment depends on the nature and tax status of the underlying benefit and the prevailing law.

General tax disclaimer: Tax benefits and tax treatment are subject to the provisions of the Income-tax Act, 2025, as amended from time to time, eligibility conditions and the individual circumstances of the policyholder. The Income-tax Act, 2025 came into force from 1 April 2026. Customers should consult a tax adviser for advice specific to their circumstances.

Source: Income-tax Act, 2025, as amended by the Finance Act, 2026; Schedule II; Sections 11, 67, 123 and 202; applicable CBDT guidance.

Related guides: ULIP tax benefits | ULIP maturity taxation | ULIP tax benefits for NRI | GST on ULIP premium

ULIP returns can mean three different things. The 4% and 8% shown in a Benefit Illustration are standard illustration assumptions; a ULIP fund's return shows how that particular fund performed; while your policy return shows how the money you personally invested performed after considering premiums, charges, withdrawals, fund switches and policy additions.

For a regular or limited-premium ULIP, XIRR is the more appropriate measure of your individual policy return.

Fund Return vs Policy Return

A ULIP fund return measures how the NAV of one underlying fund has performed. Your policy return is different because it reflects when premiums were paid, charges deducted, fund switches, withdrawals and any additions credited to the policy. For a regular-premium ULIP, XIRR (Extended Internal Rate of Return) is therefore usually more meaningful than quoting only the fund CAGR.

Fund CAGR tells you how the fund performed.

Policy XIRR tells you how your money performed.

Why Do ULIP Benefit Illustrations Show 4% and 8% Returns?

ULIP Benefit Illustrations show benefits using assumed gross investment returns of 4% and 8% per annum, in accordance with the applicable IRDAI illustration requirements.

These are not the expected returns from the policy and are not guaranteed returns.

For example, the Bajaj Life Goal Assure IV, a unit-linked non-participating individual life savings insurance plan’s Benefit Illustration states that the 4% and 8% rates are used only to illustrate how benefits may vary and are neither guaranteed nor the upper or lower limits of what the policy may actually earn.

Actual market returns can therefore be higher or lower than 4% or 8%.

Does Staying Invested Improve Historical Equity Outcomes?

Historical Nifty 50 TRI rolling-return data shows how often the index delivered a non-negative return across different holding periods. This is index evidence-not a forecast of ULIP returns.

In this historical series, the frequency of non-negative outcomes increased as the holding period became longer. A longer horizon did not guarantee a specific return; it reduced the frequency of negative outcomes in the period studied.

ULIP fund returns can differ materially from the Nifty 50 TRI because funds may follow different mandates and the policy return also reflects charges, premium timing, switches, withdrawals and other policy events.

Measuring ULIP Fund Performance

An insurer manages multiple ULIP funds. These may include large-cap, mid-cap, flexi-cap, index, hybrid, debt and other funds.

Each fund has its own NAV (Net Asset Value). The insurer reports the performance of the entire fund over different periods.

For example, suppose an equity ULIP fund reports a 5-year CAGR of 12%. This means the NAV of that fund grew at an annualised rate of 12% over that five-year period. It does not mean every policyholder invested in the fund earned 12%.

For fund-performance disclosure, returns up to one year are shown as absolute returns and returns for periods longer than one year are shown as CAGR, in line with IRDAI requirements.

NAV in a ULIP

NAV (Net Asset Value) is the value of one unit of a ULIP fund.

Fund Value = Number of Units × Current NAV

If NAV rises to ₹30, those 10,000 units become worth ₹3,00,000.

NAV therefore helps determine the value of your holdings in a particular ULIP fund. However, NAV growth or the fund's CAGR should not be treated as your individual policy return, particularly when you have been paying premiums over several years.

Measuring Your ULIP Policy Return

Your policy return answers: "At what annualised rate has the money I actually put into my ULIP grown?"

Suppose you pay a ₹10,000 monthly premium for 20 years. You have not invested the entire ₹24 lakh on the first day.

• Your first ₹10,000 premium may remain invested for almost 20 years.
• A premium paid after five years may remain invested for about 15 years.
• Premiums paid towards the end of the policy remain invested for much shorter periods.

Your policy may also change considerably during those 20 years.

Factors Affecting Your ULIP Policy Return

Your policy return is affected by more than the performance of one fund. Premium timing, mortality and other charges, the funds selected, switches, withdrawals, loyalty additions³ or boosters and the length of time invested can all change the final outcome. That is why two policyholders in the same ULIP fund can earn different policy-level returns.

This is why two customers investing in the same ULIP fund can have different policy returns.

XIRR in a ULIP

XIRR (Extended Internal Rate of Return) is the annualised return on your individual ULIP policy after considering the amount and date of every premium paid, every withdrawal or payout received, and the value remaining in the policy.

It calculates one annualised return for the complete series of cash flows.

This is particularly important for regular or limited-premium ULIPs because every premium is invested on a different date and therefore remains invested for a different period.

Calculating XIRR for a ULIP

Consider this simplified example:

• ₹10,000 monthly premium
• Premiums paid for 5 years
• Total premiums paid: ₹6,00,000
• Partial withdrawal after 3 years: ₹2,00,000
• Fund value at the end of 5 years: ₹5,50,000

XIRR looks at the actual date of every cash flow:

The 11.33% XIRR is the single annualised rate that mathematically connects all 60 premiums invested on different dates, the ₹2 lakh withdrawn during the policy and the ₹5.50 lakh remaining in the policy at the end.

XIRR therefore recognises that every premium has been invested for a different length of time.

Charges, Loyalty Additions and Fund Boosters in XIRR

Only money that actually moves between the customer and the policy is normally entered as a separate XIRR cash flow.

Charges or additions that happen inside the policy are already reflected in the fund value and should not normally be entered again.

So your ULIP policy journey can be represented as:

Premiums paid -> applicable charges -> money invested -> fund performance -> fund switches/redirections -> withdrawals -> loyalty additions/boosters/returned charges -> final policy value -> XIRR

Fund return and policy return: example

Suppose the ULIP equity fund in which you initially invest reports a 12% CAGR over five years.

• You pay a ₹10,000 monthly premium.
• You buy units at different NAVs every month.
• You switch from the equity fund to a debt fund after five years.
• You later move some money back to equity.
• You make a partial withdrawal.
• You pay mortality and policy administration charges.
• You receive a loyalty addition³ at the end of the policy.

The 12% fund CAGR cannot tell you the return earned by your policy.

Your policy XIRR considers your own dated premiums, withdrawals and final policy value, which already reflects the impact of charges, different funds and applicable policy additions.

Fund performance tells you how an individual fund performed.

Policy XIRR tells you how your complete ULIP investment performed.

When CAGR Can Be Used for a ULIP Policy

CAGR can be used for a simple single-premium ULIP, where there is one investment at the beginning and one value at the end.

With one starting investment and one ending value, CAGR can show the annualised growth.

If the policy has top-ups, withdrawals or other intermediate customer cash flows, XIRR is more appropriate.

ULIP Plan Calculator and ULIP Return Calculator

A useful ULIP plan calculator should show more than a projected maturity value. It should state the premium frequency, policy term, assumed return, life cover, applicable charges and projected fund value. A ULIP return calculator should also help the user understand the annualised policy return rather than presenting the projected corpus alone.

For a simple single-premium ULIP with no intermediate cash flows, CAGR can be shown instead.

For regular-premium ULIPs, showing only the projected corpus does not give the complete picture. Showing XIRR alongside the projected value allows the customer to understand the annualised return represented by the complete series of premiums and policy cash flows.

Related guides: ULIP benefit illustration | NAV of ULIP | calculate ULIP fund value | ULIP calculator

A ULIP’s long-term outcome depends on fund performance, time invested, premium continuity, asset allocation, charges, withdrawals and how risk is managed as the financial goal approaches.

How Does a ULIP Help in Wealth Creation Over Time?

A ULIP can support long-term wealth creation when premiums remain sustainable, the fund allocation matches the goal and the investment is given enough time to move through market cycles. Compounding, disciplined premium payments, periodic rebalancing and reducing risk as the goal approaches can all influence the final corpus; returns remain market-linked.

Investor Behaviour During a Market Fall

A market fall affects every investor exposed to the same market. What differs is the action taken after the fall. Stopping contributions or exiting can change the final outcome even if the future market path is identical.

This comparison does not assume that staying in equity is always correct. If risk capacity or the goal horizon changes, reducing equity exposure can be appropriate. The behavioural mistake is making an unplanned exit and then having to predict when to re-enter.

De-risking as the Financial Goal Gets Closer

Consider a long-term goal that is 20 years away.

This is an illustrative goal-based framework, not a prescribed asset allocation. The appropriate equity-debt mix depends on the investor, product, goal and prevailing circumstances.

Tracking Progress Towards Your Financial Goal

Do not judge your ULIP only by looking at the latest one-year or five-year return of one fund. The more useful question is: “Is my overall policy progressing towards the corpus required for my financial goal?”

• Current fund value
• Withdrawals or payouts already received
• Policy XIRR
• Premiums you still plan to pay
• Time remaining until your financial goal
• Corpus required for that goal

The previous section explains why policy XIRR, rather than the CAGR of one fund, is the more appropriate measure of how your own ULIP investment has performed.

There is no strategy that can guarantee higher ULIP returns. The purpose of managing the policy well is to keep the investment, risk and cash flows aligned with the financial goal throughout the policy term.

After purchase, manage a ULIP by tracking the policy, reviewing the fund allocation, using switches or premium redirection when needed, limiting withdrawals and reducing investment risk as the financial goal approaches.

1. Track your fund value and policy status. Review fund value, NAV, units, allocation, premium due dates, policy status and benefits. Do not judge the policy only by short-term NAV movement.
2. Review your fund allocation periodically. Reassess the allocation when your goal, investment horizon, risk appetite or financial situation changes.
3. Use fund switches and premium redirection appropriately. Use them to maintain a suitable asset allocation, not to repeatedly predict short-term market movements.
4. Use top-ups selectively. A top-up can be considered when you have surplus money to invest, subject to the selected plan’s terms, charges and life-cover rules.
5. Use partial withdrawals carefully. Withdrawals after the applicable Lock-in period can provide liquidity, but they reduce the corpus that remains invested for your goal.
6. Reduce risk as the goal gets closer. Consider gradually moving from higher-risk equity exposure towards lower-risk debt or liquid funds as the date on which you need the money approaches.
7. Manage market volatility through allocation, not market timing. A switch should reflect a change in risk capacity, goal horizon or desired asset allocation rather than repeated attempts to predict market highs and lows.

ULIP Fund Switching During Market Volatility

ULIPs allow you to change the equity-debt mix without exiting the policy. Bajaj Life ULIP plans offer unlimited fund switches, subject to the terms of the selected plan.

If your risk tolerance or goal horizon changes, you can move existing money through a fund switch or change future allocations through premium redirection instead of stopping the policy.

Fund Switching vs Premium Redirection

Fund switching and premium redirection change different parts of a ULIP portfolio. A fund switch moves money that is already invested between available funds. Premium redirection changes where future premiums are invested while the existing units remain unchanged. Used appropriately, both can help keep the policy’s asset allocation aligned with the investor’s goal and risk profile.

Use switching or premium redirection when your required asset allocation changes. Do not use them simply because markets have risen or fallen over a short period. 

Related guides: premium redirection in ULIP

A ULIP can pay out money in different situations: on death, at maturity, through a partial withdrawal, or on surrender of the policy. The process and amount payable depend on the event and the terms of the selected ULIP.

ULIP Death Claim Process

Step 1: Inform Bajaj Life: Notify Bajaj Life about the death through the available claim-intimation channels and provide the policy and claimant details.

Step 2: Submit the required documents: Submit the claim form and supporting documents. Depending on the circumstances, these may include the death certificate, policy details, identity and address proof of the nominee or claimant, bank details, medical records and additional legal or police documents where required.

Step 3: Claim verification: Bajaj Life reviews the claim, policy details and submitted documents. Additional information or documents may be requested if required.

Step 4: Claim decision and settlement: Once the required verification is completed, the claim is decided in accordance with the policy terms and applicable regulations. If accepted, the applicable death benefit is paid to the eligible nominee or claimant.

ULIP Maturity Payout

If the life assured survives until the end of the policy term, the policyholder receives the applicable maturity benefit. For a ULIP, the maturity amount is generally based on the fund value at the end of the policy term, which depends on the number of units accumulated and their NAV at that time. Certain plans may also provide additional maturity benefits as specified in the product terms.

ULIP Partial Withdrawals

Once the five-year Lock-in periodis completed, you can withdraw a portion of your fund value while keeping the remaining amount invested. Partial withdrawals are subject to the conditions of the selected ULIP, including applicable minimum or maximum withdrawal limits and other product-specific requirements.

ULIP Surrender and Complete Exit

Surrender means closing the policy before its maturity date. If the policy is surrendered during the five-year Lock-in period, the applicable fund value, after deduction of the discontinuance charge, is transferred to the Discontinued Policy Fund and is payable after completion of the Lock-in period, as per the applicable rules.

If the policy is surrendered after completion of the Lock-in period, the applicable surrender value is paid according to the policy terms. Surrender also terminates the life cover under the ULIP.

See what happens if you stop paying premiums or surrender a ULIP

Related guides: partial withdrawal from ULIP

Several common views about ULIPs come from older product structures or from treating every ULIP as identical. Charges, liquidity, investment choice and death-benefit structures vary by product and regulation. The table below separates five recurring myths from the current facts a customer should check before deciding whether a ULIP fits the financial goal.

1. Treating five years as the ideal investment horizon: The Lock-in period is only a minimum restriction. Choose the investment period based on your goal.
2. Switching funds too frequently: Use switches for rebalancing or changes in risk profile, not short-term market timing.
3. Choosing funds only by recent returns: Consider risk appetite, goal horizon, asset allocation, active/passive preference, benchmark performance and fund-manager track record.
4. Ignoring ULIP charges: Review fund management charges, mortality charges, policy administration charges, premium allocation charges and other applicable charges, along with Reduction in Yield.
5. Choosing a premium you may not sustain: Select an amount and premium-paying term that fit your income and other financial commitments.
6. Expecting quick returns: ULIPs are market-linked and short-term returns can fluctuate. Evaluate them over an appropriate long-term horizon.
7. Withdrawing too frequently: Every partial withdrawal reduces the amount that remains invested for your original goal.
8. Not reviewing your allocation as the goal approaches: Review the portfolio periodically and consider reducing risk as you get closer to your goal.

ULIPs use insurance, investment and policy-administration terms in the same product. Understanding terms such as NAV, fund value, mortality charge, premium redirection, XIRR and Discontinued Policy Fund makes product documents easier to compare. The glossary below defines the technical terms used across this page in plain language.