Why should you opt for a ULIP Plan in 2026? Benefits, fund options, and what to know before investing

If you're looking to invest for the long term, you may be wondering whether you should choose a market-linked investment, a life insurance policy, or somehow combine the two. In 2026, that decision also comes with a changing tax environment, evolving insurance regulations and more investment choices than ever.

What is ULIP?

In short, Unit Linked Insurance Plan (ULIP) brings life insurance and market-linked investment together in one policy. You can choose funds based on how much market risk you're comfortable taking and, subject to your policy terms, switch between funds as your needs change.

What can a ULIP do for you?

A ULIP gives you two things within one policy:

• Life insurance: Your policy provides life cover for your loved ones, as per its terms.
• Market-linked investment: A portion of your premium is invested in funds that you select, giving you the opportunity to grow your money over the long term.
  

This can be useful if you don't want to manage your life insurance and long-term investment completely separately. However, ULIP returns are market-linked and aren't guaranteed. Your fund value can go up or down depending on market performance.

Can I use a ULIP to save for a long-term goal?

Yes. This is where a ULIP can become particularly relevant. ULIPs can help fund long-term goals like:

• Your child's higher education
• Your retirement
• Buying a home
• Building a long-term corpus

Why should I consider ULIP instead of keeping insurance and investment separate?

A ULIP can be useful if you want your life insurance and long-term investment to work together as part of one financial plan. Instead of managing your insurance policy and market-linked investment separately, a ULIP combines both under one policy and a combined premium, while giving you a choice of funds based on your risk appetite and, subject to policy terms, the flexibility to switch between them as your needs change.

Can I choose where my ULIP money is invested?

Yes. That's one of the important choices you make when you buy a ULIP. Depending on your policy, you can choose from different fund options with exposure to equity, debt or a combination of asset classes.

• If you're comfortable with market ups and downs and have a long investment horizon, you may consider an equity-oriented fund.
• If you'd rather take relatively less market risk, you may consider a debt-oriented fund.
• If you want a combination of the two, a balanced or hybrid fund may be an option.
  
  

The right fund isn't necessarily the one that delivered the highest return last year. It's the one whose risk and investment objective make sense for you.

What if my risk appetite changes after I buy a ULIP?

That's where fund-switching flexibility can be useful. Imagine you start investing in your 30s. You have a long investment horizon and are comfortable with equity-market fluctuations, so you choose an equity-oriented fund. A few years later, you're getting closer to your financial goal and don't want to take the same level of risk.

Depending on your policy, you may be able to switch your investment between available funds. This means your investment strategy doesn't necessarily have to remain the same throughout the policy term. However, fund switching shouldn't mean reacting to every market rise or fall. Your decision should be based on your goal, investment horizon and risk appetite.

What happens to my ULIP when the market falls?

Your ULIP fund value can fall when the underlying investments fall. That's an important part of investing in a market-linked product. But here's what you should ask yourself before reacting to a market correction:

• Has my financial goal changed?
• Has my investment horizon changed?
• Has my ability to take risk changed?
  
  

If the answer is no, a short-term market fall may not necessarily mean you need to change your investment strategy. Staying invested for long-term gives you the desired market gains.

How have ABSLI ULIP funds performed?

Naturally, once you start comparing fund options, you'll want to see how they've performed historically. Here is a snapshot of selected ABSLI ULIP funds as of March 31, 2026:

Source: ABSLI Individual and Pension Fund Factsheet, March 31, 2026: https://lifeinsurance.adityabirlacapital.com/forms-and-downloads/investment-factsheets/

[Compare ULIP Plans]

Can ULIP be purchased online?

Yes. With Aditya Birla Sun Life Insurance (ABSLI) online journey, you can compare plans, calculate your investment and complete the purchase online, including paperless KYC. You can also manage your ULIP digitally after purchase. ABSLI's customer portal allows policyholders to access fund value, download statements and make fund-switch requests online.

[Buy ULIP Online]

Are there tax benefits in ULIP?

ULIP can offer tax benefits at three stages under Income Tax Act 2025, subject to the applicable tax rules and conditions.

• When you pay the premium: If you opt for the old tax regime, eligible ULIP premiums can qualify for a deduction of up to ₹1.5 lakh a year under Section 123 of the Income Tax Act 2025 (previously Section 80C), within the overall limit applicable to eligible investments and subject to conditions such as the premium-to-sum-assured requirement.
• When your ULIP matures: The maturity amount can be exempt from tax under Section 11 read with Schedule II of the Income Tax Act 2025 (previously Section 10(10D)) if the policy meets the applicable conditions. For ULIPs issued on or after February 1, 2021, one of the key conditions is that the aggregate annual premium across applicable ULIPs should not exceed ₹2.5 lakh, along with the applicable premium-to-sum-assured condition. If these conditions aren't met, the gains, rather than the entire maturity amount, may be taxable under the applicable capital gains provisions.
• When a death benefit is paid: The death benefit received by the nominee is generally exempt from tax, subject to the applicable provisions.

[Tax Benefits in ULIP]

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