Do ULIPs guarantee returns? What policyholders should know in 2026

Returns from the fund component of a Unit Linked Insurance Plan (ULIP) are linked to the market and are not guaranteed. The value can rise or fall with the chosen funds, after applicable charges. A policy may separately define a death benefit or another Insurance benefit, but that contractual benefit should not be described as an investment return.

Quick answer: A ULIP combines Life Insurance cover with market-linked fund allocation. The life cover and the fund value are different parts of the policy. Read the benefit illustration, policy wording, charges, and risk disclosures before deciding whether the product fits your protection needs, time horizon and risk tolerance.

What does ‘return’ mean in a ULIP?

In a ULIP, return usually means the change in the value of units allocated to one or more policy funds. Your premium is not the same as your fund value. Applicable charges may be deducted as described in the policy, and the remaining amount is used to purchase units at the relevant net asset value (NAV).

The fund value depends on the number of units held and the prevailing NAV. NAV can move up or down with the underlying portfolio and market conditions. Consequently, neither the maturity fund value nor the rate of return can be known in advance.

This is also why a ULIP should be assessed as a Life Insurance product with a market-linked component, not as a fixed-return arrangement. The policyholder bears the investment risk in the investment portfolio.

Are the 4% and 8% figures in a benefit illustration guaranteed?

No. Where a benefit illustration shows values at assumed gross rates such as 4% and 8% a year, those figures are scenarios prescribed for illustration. They are not promises, forecasts, minimum returns, or maximum returns. Actual values will depend on fund performance, charges, premium payment, and the policy term.

Use the illustration to understand how the policy mechanics and charges may affect projected values under standardised assumptions. Do not read either column as the amount you will certainly receive. If any entry is unclear, ask for an explanation and compare it with the policy document before purchase.

Is a ULIP death benefit the same as a guaranteed return?

No. A death benefit is an Insurance benefit payable to the nominee or beneficiary when an insured event occurs, subject to the policy terms and claim requirements. It is not a return earned by the fund component. The way a death benefit is calculated varies by product. Depending on the policy, it may refer to the sum assured, fund value, a higher-of formula, an aggregate formula, or another defined basis. Applicable deductions, minimum-benefit rules, and exclusions must be checked in the specific contract. Avoid assuming that one ULIP’s formula applies to every ULIP.

If policy material uses the word ‘guaranteed’ for a particular benefit, the guarantee applies only as stated in that contract and subject to its conditions, including payment of all due premiums where specified. It does not convert market-linked fund returns into guaranteed returns.

What can make a ULIP fund value rise or fall?

The fund value reflects both policy cash flows and market experience. Key influences include:

• Fund choice: Equity, Debt, and other available policy funds carry different risk and return characteristics.
• Market movement: The value of securities held by the fund changes over time.
• Charges: Mortality, fund management, policy administration, premium allocation, and other charges may apply according to the product terms.
• Premium pattern: The amount and timing of premiums affect how many units are allocated.
• Withdrawals and switches: Permitted transactions can change the unit balance or risk mix, subject to policy conditions.
  
  

Past fund performance does not guarantee future performance. Switching funds may change exposure, but it cannot remove market risk or guarantee a particular outcome.

How should you assess actual ULIP performance?

A simple comparison of starting and current NAV can show how the NAV changed, but it may not show your personal return accurately when premiums, charges, or withdrawals occurred on different dates. A cash-flow-aware measure can be more informative for your own policy experience. For a practical review, use your policy account statements and note premiums paid, dates, units allocated, charges, withdrawals, and current fund value.

The insurer’s statement is the relevant record for policy transactions. If you need a personalised calculation or suitability assessment, consult an appropriately qualified financial or tax professional.

Can you withdraw from a ULIP whenever you want?

No. Linked Insurance products do not offer liquidity during the first five years of the contract. A policyholder cannot completely or partially withdraw the linked-policy money during this lock-in period. After the lock-in, partial withdrawals may be available only within the limits and conditions of the specific policy.

The lock-in should therefore be treated as a real planning constraint. Keep separate emergency funds and do not commit money needed for near-term expenses merely because a projected illustration looks attractive.

What should you check before choosing a ULIP?

Start with your need for life cover, then examine whether the market-linked structure suits your time horizon and capacity to tolerate fluctuations. Review these items in the sales literature and policy documents:

1. The amount and duration of life cover, including the exact death-benefit formula.
   
2. Available funds, their objectives, asset mix, and risk level.
   
3. Every applicable charge and when units may be cancelled to recover it.
   
4. Premium payment term, policy term, discontinuance consequences, and revival provisions.
   
5. The five-year lock-in and the rules for later partial withdrawals.
   
6. Fund-switching rules, limits, and charges, if any.
   
7. Tax treatment applicable to your policy and circumstances.
   
8. The free-look provisions stated in the policy document.

How can ABSLI help?

Aditya Birla Sun Life Insurance provides policy documents, sales prospectuses, benefit illustrations, fund information, and servicing resources for its available ULIP products. Product features, charges, fund options, eligibility, and benefits differ, so readers should use the documents for the specific product and version under consideration rather than rely on a general article alone.

Explore ULIP information

Review individual fund information

What is the bottom line on guaranteed ULIP returns?

ULIP Fund returns are not guaranteed. Maturity value depends on market-linked fund performance, policy cash flows, charges, and contract terms. A separately defined death benefit is an Insurance benefit, not an investment return. Decide only after reading the personalised benefit illustration, sales prospectus, and policy wording, and after considering whether the life cover and market risk both suit your needs.

To learn more, click here

Also read

• What is a Unit Linked Insurance Plan? Meaning, charges, risks and tax rules
• What happens to ULIP premiums if the market crashes?
• How is your ULIP premium utilised?
• Things to know before choosing a ULIP
  
  

Sources

• Insurance Regulatory and Development Authority of India, Insurance Products Regulations, 2024: https://financialservices.gov.in/act-and-policies/3485
• IRDAI, Master Circular on Protection of Policyholders’ Interests, 2024, including linked-policy lock-in and partial-withdrawal provisions: https://irdai.gov.in/
• Life Insurance Council, FAQs on ULIPs, including market risk and guarantee distinctions: https://www.lifeinscouncil.org/faqs/ULIPS
• Income Tax Department, Exempt Income, Section 10(10D) conditions for ULIPs: https://www.incometaxindia.gov.in/w/exempt-income
• Aditya Birla Sun Life Insurance, ULIP plan disclosures and linked-insurance risk statement: https://lifeinsurance.adityabirlacapital.com/ulip-plan/
• Aditya Birla Sun Life Insurance, live source article reviewed 8 September 2026: https://lifeinsurance.adityabirlacapital.com/articles/wealth-insurance/do-ulips-offer-guaranteed-returns/