Unit Linked Insurance Plan: Coverage, Claim and Exclusions


Financial planning is crucial, and when done from an early age, can give a much-needed head-start that has several long-term benefits. Among the various investment avenues an individual might explore, a life insurance policy is critical. In the policyholder absence, it acts like a much-needed financial support for the family. 

Considering the plethora of policies to choose from, it is to get confused in selecting the right life insurance coverage. Each policy has its unique benefits. Unit Linked Insurance Plan or ULIP is one such type of life insurance that offers a dual benefit of investment and protection. 

What are ULIPs?

A ULIP is a unique life insurance product that offers insurance and investment in a single product. So, whether it is ensuring a financial safeguard for your family or meeting your financial goals, you can be ready for both. 

The coverage of Unit Linked Insurance Plans 

A ULIP coverage is divided into two parts — insurance and investment. Accordingly, the premiums are apportioned in these two parts. In case of an unfortunate demise or disability, the sum assured is paid to the policyholder or the dependents. Thus, the insurance aspect of a ULIP works in a more conventional sense. 

On the other hand, the investment aspect offers the policyholder the option to choose between various funds based on your risk appetite. When you purchase a ULIP from an insurer, you get to choose whether you want to assume the high risk associated with equity markets or invest in bonds that have comparatively stable returns. You need not get involved in the nitty-gritties of tracking or managing your investment for which dedicated fund managers are appointed. 

Claim Process for ULIPs

  • Raising a claim for a ULIP involves informing the insurer of the untoward incident. 
  • Once the claim is registered by the insurance company, necessary documents, like the claim form and personal documents of the policyholder and the dependents, need to be provided. 
  • These documents are verified by the insurance company, and only then, the compensation is transferred. Depending on the terms of the ULIP, only sum assured, sum assured plus current value of the fund, the entire value of the fund or sum assured or just the fund value is transferred.  
  • In case the claim is rejected, the insurer shall provide a reason for rejection. 

The documents required for making a claim

The following documents are required at the time of making an insurance claim: 

  • Claim form.
  • Policy document.
  • Medical certificate.
  • Photo identification and address proof of the claimant.
  • FIR and post-mortem report in case of accidental death.
  • Medical certificate and medical reports from the hospital for demise due to illness. 

Exclusions under ULIPs

Like every insurance plan, ULIPs also have a pre-defined coverage. Thus, some events are excluded from the coverage. These specific events are called as exclusions under the policy and are laid down in the policy document. Being informed of these exclusions helps you avoid facing problems when raising an insurance claim. Here are the exclusions that are generally defined:

  • Death due to an accident under the influence of alcohol.
  • Attempt of suicide by the policyholder.
  • Demise due to the adverse effects of drugs and alcohol.
  • Death in the event of racing or dangerous sports as defined in the policy cover. 

The benefits of buying a ULIP cover

ULIP benefits include not just insurance as a service, but also the meeting of wealth creation goals. It provides flexibility in getting the necessary funds with a few switches, without any extra cost. Further, it is a great avenue that helps to achieve long-term financial goals like child’s education, marriage, etc. while offering insurance coverage at the same time. 

The investment component of a ULIP benefits by earning market-linked returns during the tenure. In addition, retirement corpus can also be built due to high returns that are available. Lastly, tax benefits are also available under section 80C of the Income Tax Act for premium paid in addition to exemption of income earned under section 10(10D).

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