ULIPs draw flexibility to change from debt- to equity-based depending on market situations. And, these switches do not attract any taxes. 
History
After working for more than 5 years, I only came across investments like the employee provident fund account. Health insurance under the group insurance scheme offered by my organisation. I started thinking of breaking through this and making investments in a corpus fund. I saw it as an investment that can provide me with security for my old age and money for my children’s education or marriage, along with a life insurance in case of unforeseen events to protect my family. So, I decided to buy a term plan wherein; I will be insured for a lump sum amount. I also decided to invest in a SIP mutual fund wherein; the money is invested in equities market to help my investment grow.
Later
However, I was still not convinced with my decision as the term plan would insure me till the tenure of the policy, and in case of market instability, I could end up losing most of my invested money in the mutual fund. Also, I would have to keep an account of the due dates of the policy. In case I miss the due dates, the policy may lapse. These factors made me think about whether there is a plan that can provide me with the benefits of investments as well as insurance.
It was then that I came across ULIPs, which are necessary endowment plans. Though it is a plan for long-term commitments which suitably extend over the course of 12 – 15 years, the benefits offered by ULIPs make it a unique and attractive option. The primary intention of ULIPs is to provide excellent returns on investment while providing an insurance coverage to the policyholder.
Action
I contacted an insurance agent to know more about ULIPs and analysed features provided by this plan which would best suit me. Let me take you further to understand what I discovered and how ULIPs work in everyone’s favour.
Insurance + investment plan
This plan provides not only the insurance cover but also ensures that the premium paid is invested in growth securities, which in turn provide good returns over time. Here, the money is invested in equity and debt markets.
Adjustable to the changes in the market
ULIPs are flexible to change from debt to equity and vice versa depending on the volatility of the market. If the market is constantly falling, you can switch your funds from the equity to debt markets till either market regain stability. In case the market is rising, you can again switch your investments from the debt to equity markets.
The best part about switching from one fund to another is that it does not attract any taxes. There is no short- or long-term capital gains tax that needs to be given for any switches made. This the best feature of ULIPs and is exclusive to this investment tool.
A lock-in period
As per the 2010 guidelines issued by the IRDAI, any person investing in a ULIP must pay premiums till the tenure of the policy and a lock-in period of 5 years will be applicable on the plans. The period of 5 years gives the investor some time for the investment to perform, and the mandatory payment of premium allows the money to grow and compound with time.
Restriction on fund management charges
Fund management charge is a fee that is levied for managing funds. It is in the form of a % charged on the Net Asset Value (NAV). This fee is charged on the accrued or aggregate amount and is subtracted before arriving at the NAV. As per the IRDAI, the fund management charges cannot exceed 1.35% per annum. This fee is lower in ULIPs directed towards debt markets.
Benefit of tax exemption
The premiums paid are exempted from tax u/s 80C (provided the premiums do not exceed 10% of the sum assured), and proceeds from the policy due to maturity/death are exempted u/s 10(10D) of the Act.
If the premium exceeds the limit of 10% of the sum assured. The excess of 10% will not be allowed as deduction.
Availability of a rider on a ULIP to increase coverage
Riders are additional benefits attached to an existing plan. Common riders like the accidental death benefit or critical illness rider can be taken with a nominal increase in premium; thus, enhancing your insurance cover.
Conclusion
These features make a ULIP not only a desirable plan but also, with its distinctive benefits. Do not forget to compare the plans available online to know which ULIP best fits best your needs.