Unit-Linked Insurance Plans (Ulips) have been in India since 1971 and have a special role as an investment option for the investors. The article looks at various aspects of the Ulips.

Ever since the insurance sector has been thrown open to private players, a new innovative product that has taken the market by storm is Ulip, which serves as a one-stop shop for investment, insurance and tax efficiency. Its primary role is to serve as an insurance product with its structure and functioning like a mutual fund product.

Ulips have proved quite appealing to the consumers given the buoyancy of the Indian stock markets over the last few years. In the scenario of falling interest rates, it is becoming increasingly difficult for financial institutions and banks to offer guaranteed returns to the investors. This has brought about a complete change in the expectations of the investors. Now, there is an increasing acceptance of variable returns offer by Ulips.

The Unit Trust of India (UTI) was the first to launch the Ulip in India in 1971, by entering into a group insurance arrangement with the Life Insurance Corporation of India (LIC) to provide life cover to its investors. Thus, the UTI as a mutual fund, is taking care of investing the unit-holder's money in the capital markets, while the LIC is providing the required insurance cover.

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