Hyderabad: For most Indians, investing is more than just growing money; it’s about securing life’s milestones. Whether it’s planning for retirement, children’s education, or building a safety net, every investment carries a long-term dream. The success of these dreams doesn’t depend on timing the market or chasing the next hot stock, but on staying invested long enough for compounding to do its work.
Pavit Laul, Head of Investments, Policybazaar.com said, “In today’s fast-evolving investment landscape, new-age ULIPs have truly come of age — combining transparency, efficiency, and tax advantages with the discipline needed for long-term wealth creation. They go beyond mere returns, offering life protection and the power of compounding to help investors achieve their life goals with confidence. With lower costs and tax-free maturity benefits, ULIPs are no longer just an insurance product, but a smart, future-ready wealth solution for India’s new generation of investors.”
That’s where new-age ULIPs (Unit Linked Insurance Plans) have found renewed relevance. They encourage the very thing that drives wealth creation: long-term, consistent investing. Once criticized for being opaque and expensive, ULIPs today have evolved into efficient, transparent, and tax-smart financial products. With lower charges, complete visibility, and built-in life cover, they are reshaping how serious investors approach long-term wealth creation.
Among market-linked investments, taxation often decides how much of your return you actually keep. While equity mutual funds attract a 12.5% long-term capital gains (LTCG) tax on profits above Rs 1.25 lakh, ULIPs hold a crucial edge. Their maturity proceeds are completely tax-free under Section 10(10D), provided annual premiums stay within Rs 2.5 lakh and the sum assured is at least ten times the premium.
Over decades, this advantage adds up significantly. For instance, an investor allocating Rs 10,000 a month for 10 years and staying invested for 20 years could see a ULIP corpus of about Rs 85–86 lakh at a 15% market return. A similar direct mutual fund might yield about Rs 95 lakh pre-tax, but after paying LTCG tax, the take-home amount drops to roughly Rs 84 lakh. Compared to regular mutual funds with higher expenses, the post-tax gap can widen to nearly Rs 10–12 lakh.
In summary, a long-term investor can expect comparable or even better post-tax returns, if they make the right investment choices. Moreover, the gap in returns can become even wider if one considers an increase in LTCG tax rates 10 or 20 years down the line, which is a realistic possibility.
This transformation in ULIPs is the result of steady regulatory reforms and the rise of digital distribution. A decade ago, ULIPs carried heavy front-loaded costs, sometimes as high as 5–6% annually. Those days are gone.
Today, Fund Management Charges (FMCs) for online ULIPs stand at about 1.25–1.35%, almost identical to the 1.2% typical of regular mutual funds and only slightly higher than the 0.5% charged by direct funds. These leaner cost structures have put ULIPs on par with market-linked instruments in efficiency, while retaining their tax advantages.
The real strength of ULIPs lies in how they keep investors invested. With a mandatory lock-in period of five years, they promote long-term discipline, something even seasoned investors often struggle to maintain with open-ended products.
In a market prone to short-term speculation, ULIPs shift focus to time in the market rather than timing it. This structure builds consistency, reduces impulsive decisions, and allows compounding to work undisturbed. Over time, this behavior becomes the biggest differentiator between erratic savers and successful wealth creators.
It may surprise many that in other market-linked instruments such as mutual funds, only a single-digit percentage of investors stay invested beyond five years. ULIPs, on the other hand, encourage long-term discipline and enable superior wealth creation through the power of compounding.
Beyond returns, ULIPs also bring a crucial layer of protection. They combine wealth creation with life insurance, ensuring that even in an unforeseen event, your family’s financial goals remain secure.
In the case of any unfortunate event, a Waiver of Premium option kicks in and ensures that the long-term goals, whether it is children’s education, marriage or spouse’s financial security, continue to be fulfilled. This is the power of insurance, and ULIPs continue to be the only instrument that offers such a powerful family protection along with market-linked returns.
Today’s investors, especially younger ones, are far more tax-aware and goal-oriented. They recognize that true wealth creation comes from consistent, efficient investing rather than chasing short-term returns. ULIPs align perfectly with this thinking, offering an integrated solution that merges protection, tax efficiency, and long-term discipline.
With the recent GST cut, ULIPs have become even more affordable. They deliver simplicity, focus, and fiscal prudence, qualities that resonate with India’s emerging generation of investors.
For those who believe wealth is built by staying the course, new-age ULIPs present a modern, disciplined, and tax-efficient path to long-term prosperity.
