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ULIPs: 14% Return Claims Exposed!
9 Dec, 2025
Summary
- ULIP sales pitches often inflate projected returns by ignoring hidden charges.
- High-premium ULIPs above Rs 2.5 lakh annual premium lose tax-free status.
- Insurers are only allowed to show 4% and 8% return scenarios by regulators.
Glossy presentations promoting Unit Linked Insurance Plans (ULIPs) often highlight unrealistic 14% return projections, misleading many investors. Abhishek Kumar, a Sebi-registered investment adviser, cautions that these figures omit crucial details about policy charges, such as premium allocation, mortality, and fund management fees. These deductions significantly lower the actual investment growth, resulting in returns closer to 11% annually.
Another common misrepresentation concerns tax benefits. While some ULIP pitches claim tax-free returns, this benefit is invalidated for policies with annual premiums surpassing Rs 2.5 lakh under current tax laws. The maturity gains on such high-premium policies are subject to capital gains tax, a detail frequently overlooked in sales illustrations.
These aggressive marketing tactics also appear to violate regulatory guidelines set by IRDAI, which permit insurers to illustrate only 4% and 8% return scenarios. Presenting a 14% return is a significant red flag, designed to make ULIPs seem more attractive than they are. Investors must exercise caution and understand all associated costs and tax implications.
