New Age ULIP - Modern Plans, Smart Investment

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ULIPs in India have traditionally been associated with high charges, complex structures, limited liquidity and mixed policyholder experience. But over the years, the landscape of ULIP offerings has evolved with regulatory changes, clearer disclosures, caps on charges and digital servicing options. These revamped ULIPS are often called new-age ULIPs and these plans typically have lower fees, transparent and easier to manage than the traditional plans. Read on to know know key details about these new age ULIPs in India. show less ...Read More

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Written bySumit Narula

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Reviewed byKumar Himanshu

Last Modified 21st October 2026

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What Is a New Age ULIP?

New-age ULIPs are a revamped version of traditional ULIP policies. Just like previous generations of ULIPs, these new-age ULIPs also offer dual-benefit of life insurance and guaranteed/market-linked returns. But these benefits are delivered at a significantly lower cost and with greater transparency and flexibility.

New-age ULIP plans are ideal for building wealth in the long term and enable investors to choose among equity, debt, and balanced fund schemes based on their risk profile, with the added advantages of online purchases and easy switching.

How ULIPs Have Evolved - From Old to New Age

There have been some changes in ULIPs over the years. Starting off as costly, less transparent products, ULIPs are now referred to as fourth-generation ULIPs owing to their advanced nature. These products offer greater flexibility at a lower cost and are more convenient for financial planning. Here is how they evolved over the years:

● The Beginnings

ULIPs were launched as a novel investment plan that combined the protection benefit of life insurance with the wealth creation capabilities of market-linked investments. Although the idea seemed attractive to investors seeking to reap two advantages in one instrument, older ULIPs had various fees such as fund management charges of ULIPs, premium allocation charges, hefty commissions from distributors. Their complicated nature, coupled with insufficient transparency of the product, frequently resulted in a mis-selling of these policies as short-term investment instruments.

● Up to 2010 - Loss of Popularity

As the disadvantages of initial ULIPs became increasingly obvious, investor confidence in these products began to decline.

Many initial costs were too high for investors, leading to reduced investment, while investors were receiving incorrect information about premium payments and lock-ins. As ULIPs are meant to be long-term investment vehicles, this problem has negatively affected their popularity.

● From 2010 To 2015 - Regulatory Reforms Made ULIPs Different

To protect policyholders, the regulatory authority in India introduced certain reforms. ULIP charges were restricted at specified levels, greater transparency had been achieved, and the mandatory locking of funds for 5 years had been implemented, which would enable customers to exercise discipline in investing.

● After 2015 - The Era of New Age ULIPs

Through additional reforms, ULIPs became even more appealing. Certain charges, such as the fund management charge and mortality charge, were fixed, and, due to growing competition and digitisation, policy costs further decreased. The premium allocation charge had been completely removed from many online policies, and therefore, ULIPs were much cheaper than ever before.

● Fourth-Generation ULIPs - Built for the Modern Investor

Further developments in ULIPs led to the introduction of fourth-generation, or new-age ULIPs, which place greater emphasis on investor convenience.

Flexibility has been introduced in the form of easy switching of funds, higher limits for partial withdrawals post-lock-in, and switching from equity- to debt- or cash-oriented funds. Higher tax efficiency and lower cost structures have made them even more attractive long-term investments.

● ULIPs Today - The New Age Investment Linked Insurance

Nowadays, ULIPs have managed to overcome their previous image of being too costly and too complicated. They are considered transparent, cost-efficient and flexible financial instruments that offer life insurance coverage along with market-linked wealth creation. As a result of greater investor awareness and continuous product development, modern ULIPs have become a popular option for meeting long-term financial goals such as those required for retirement planning, children's education, and wealth creation.

8 Features That Define a New Age ULIP

Compared with older ULIP schemes, which were highly criticised for high costs and a lack of flexibility, new-generation ULIP schemes are based on openness, investor convenience, and long-term wealth creation. These schemes offer a combination of life cover and market investment, with greater control over one’s finances. The following are some salient features of new-age ULIP plans.

1. Reduced Cost and Transparency

One of the greatest improvements in new-age ULIP schemes is their affordability. The recent regulatory reforms have reduced ULIP costs, making them highly beneficial for investors compared to older versions.

Most policies available today have no allocation charge and very low administrative charges, while the fund management charges are capped by the regulatory authority. Since costs will be lower, a greater portion of your premium can be invested, making it easier to accumulate wealth.

2. Several Investment Choices along with an Option to Change

Modern ULIP plans allow you to invest based on your objectives and risk profile. You can opt for equity funds, debt funds, balanced funds, large-cap funds, mid-cap funds, or multi-cap funds, and switch among them anytime your approach to investing changes.

In addition, you have the facility to change among different funds if required, and most of the insurance companies offer several fund changes during the year for free.

3. Automated Portfolio Management

The automation of portfolio management is a unique benefit of new-age ULIP plans, enabling investors to optimise their returns and minimise risks.

Depending on the insurer, the plan may offer options such as the Systematic Transfer Option (STO), in which money is invested in equities incrementally to mitigate the effects of market fluctuations.

Secondly, there will be Auto Fund Rebalancing, in which the client's selected equity-debt ratio is automatically maintained. Thirdly, there will be Return Protection, which ensures locking in of profits by transferring gains to other types of funds once the set target is met.

Finally, there will be the Safety Switch, which allows for systematic transfer of money from equities to safe funds in the final years of the policy period.

4. Flexible Premiums, Top-Ups, and Partial Withdrawals

Modern ULIP schemes offer greater flexibility than previous ones. Investors can make top-ups whenever they have extra money, which helps them grow wealth faster. After the minimum mandatory period of five years has passed, you may withdraw some of your money in an emergency or for a significant need without lapsing the policy.

5. Attractive Loyalty Rewards and Bonus Additions

Many insurance companies offer additional units or bonuses upon reaching certain milestones during the policy term. This makes investing even more attractive over the long term, as you do not need to pay any additional premium in order to get additional units.

6. Flexible Settlement and Regular Income Options

Rather than withdrawing all of one’s money in a lump sum at the end of the term, investors can also withdraw in periodic instalments. In many cases, a ULIP plan allows them to withdraw funds systematically once the lock-in period is over, thereby creating a regular source of income.

7. Tax-Effective Wealth Creation

One of the key strengths of modern ULIP plans is their tax efficiency. The eligible premium payments are deductible under Section 123 read with Schedule XV of the Income Tax Act, 2025 (previously Section 80C of the Income Tax Act, 1961). What’s more, the payout on maturity of the policy is eligible for tax exemption under the relevant tax laws, subject to applicable terms and conditions. You can easily use a ULIP calculator to check the potential returns from your investments to determine the tax savings you might be eligible for. Also, switching among the different funds within the ULIP is not subject to capital gains tax.

8. Life Insurance with Financial Security

Unlike simple investment plans, new-generation ULIP plans also come with life insurance cover for the entire policy tenure. In some cases, extended life cover is also available up to an advanced age, while in others, mortality charges are refunded at maturity, making ULIP schemes even more cost-effective.

ULIP Charges Old vs New - Complete Comparison

One of the key factors contributing to the rise in popularity of ULIPs is their greater cost efficiency than ever before. Previously, ULIPs had various charges that reduced the amount of money invested and affected future profits.

However, today’s changes in the market environment make ULIPs more transparent and cost-efficient. The following table will demonstrate how charges on ULIPs have changed:

Charge Type	Old ULIPs	New Age ULIPs
Premium Allocation Charge	Ranged from 3% to 9% of every premium paid, reducing the amount invested.	Nil in many online ULIPs, allowing the entire premium to be invested.
Policy Administration Charge	Generally up to 2% per annum or a fixed amount deducted to cover administrative expenses.	Nil in many modern ULIP plans, reducing overall policy costs.
Mortality Charge	Based on the policyholder's age, health profile, and the Sum at Risk (SAR).	Continues to be based on age and Sum at Risk (SAR), but improved underwriting and product design have helped reduce its overall impact in many plans.
Fund Management Charge (FMC)	Typically ranged between 1% and 1.35%, depending on the fund selected.	Usually 0.8% to 1.35%, depending on the fund option, with the regulatory cap remaining at 1.35%.
Partial Withdrawal Charges	Old ULIPs tend to attract charges depending on the insurer and policy terms.	Nil in many new-age ULIP plans after the mandatory lock-in period.
Fund Switching Charges	Free switches were limited; after that, charges may apply depending on the policy.	Nil in many modern ULIPs, allowing investors to switch funds without additional cost.
Overall Cost Structure	Multiple charges often reduced the effective investment amount and lowered long-term returns.	Streamlined, transparent charges ensure that a larger portion of every premium is invested, improving wealth-creation potential.

New Age ULIP as a Smart Investment Option - vs Mutual Funds & FD

Over the years, ULIPs have been unfavourably compared with mutual funds and fixed deposits due to their high cost and complexity. However, with the emergence of new-age ULIPs, the gap has been substantially reduced in terms of cost, transparency, and flexibility.

Although all investments have different uses, the table below compares modern ULIPs with direct equity mutual funds and fixed deposits:

Parameter	New-Age ULIP	Direct Mutual Fund (Equity)	Fixed Deposit (FD)
Investment Objective	Combines long-term wealth creation with life insurance.	Pure market-linked wealth creation.	Capital preservation with fixed returns.
Life Insurance	Offers life cover along with investment.	No life insurance.	No life insurance.
Investment Options	Equity, debt and balanced funds with fund-switching flexibility.	A wide range of equity, debt, hybrid, and thematic funds.	No investment choices; fixed interest rate.
Fund Switching	Free fund switching in many plans without redeeming investments.	No direct switching; one fund must be redeemed before investing in another.	Not applicable.
Tax on Fund Switching	No tax liability when switching between ULIP funds.	Capital gains tax may arise on redemption before reinvestment.	Not applicable.
Tax on Maturity / Returns	Eligible for tax benefits on premiums and tax-free maturity proceeds, subject to prevailing tax rules and applicable conditions.	Capital gains tax applicable as per prevailing tax laws.	Interest gained is taxable according to the investor's income tax slab.
Total Annual Cost (Approx. – Modern Structure)	Lower cost structure with many plans offering nil premium allocation and policy administration charges; fund management charges generally range from 0.8% to 1.35%.	Expense ratio generally around 1%–1.5% for direct equity funds.	No fund management charges.
Risk Level	Market-linked; risk depends on the chosen fund.	Market-linked; varies according to the selected scheme.	Low-risk with predictable returns.
Liquidity	Partial withdrawals allowed after the mandatory lock-in period.	Generally offers higher liquidity, subject to scheme-specific restrictions.	Premature withdrawal is allowed, though it may attract a penalty.
Ideal For	Investors seeking life cover, tax efficiency, and long-term wealth creation in one product.	Investors focused solely on wealth creation and comfortable managing investments separately.	Conservative investors looking for stable and guaranteed returns.

Should You Switch From an Old ULIP to a New-Age ULIP?

Not all old ULIPs have to be replaced. The right course of action depends on many factors, including the lock-in period of ULIP vs other options, fees, investment time horizon, and financial objectives. When deciding to switch from an old ULIP to a newer one, it is crucial to compare the charges of the old and new ULIPs and consider whether switching ULIP policies would benefit you:

Your Situation	Should You Switch to a New-Age ULIP?	Key Consideration
You're still within your old ULIP's 5-year lock-in	Usually No	Exiting early may lead to discontinuation implications, and buying a new ULIP will start a fresh lock-in period. Review your options carefully before making any decision.
Your old ULIP's lock-in has completed, and charges remain high	Possibly Yes	If your plan continues to have high premium allocation, administration, or other recurring charges, switching to a lower-cost new-age ULIP may improve long-term wealth creation. Compare overall costs and benefits before switching.
Your old ULIP already has low charges (bought after major regulatory reforms)	Not Necessarily	If your existing plan already offers competitive rates and meets your financial goals, switching may offer limited additional benefit. Review fund performance and available features before deciding.
You have many years remaining until your financial goal	Can Be Worth Considering	A longer investment tenure provides more time to benefit from lower charges, better flexibility, and modern portfolio management features offered by newer ULIPs.
Switching would mean starting a new 5-year lock-in	Evaluate Carefully	Every new ULIP comes with its own mandatory lock-in period. Consider whether restarting the lock-in aligns with your liquidity needs and financial goals before making the decision.

Conclusion

The new-age ULIP has evolved into an efficient and flexible product that combines life insurance with wealth creation. The benefits of low fees, multiple fund options, tax benefits, and modern portfolio management make it more valuable than previous ULIP products.

Although the selection of the appropriate investment strategy depends on your financial objectives and time horizon, a well-chosen new-age ULIP is a sensible addition to your portfolio.

Frequently Asked Questions

What is a new-age ULIP?

A new-age ULIP is an innovative financial instrument offering an integrated plan which covers both insurance and market-linked investments. It enables you to invest in either equity, debt or hybrid mutual fund schemes according to your risk profile while securing your life. New-age ULIP plans tend to offer low charges, increased transparency, fund switchability, and online convenience, with long-term wealth generation and insurance cover.

What is the difference between old and new ULIP charges?

Old ULIPs used to charge premiums for various services, such as premium allocation, administration, switching, partial withdrawals, and fund management, resulting in lower profitability. Modern ULIP plans have significantly streamlined their cost structures, with many ULIPs charging zero premiums for allocation, administration, switching, and partial withdrawals. Fund management and mortality charges are among the necessary charges retained in new ULIPs.

Are new-age ULIPs a smart investment option?

Yes, new-age ULIPs are truly a smart investment option, given the various advantages they offer. These include features such as an investment plan, life insurance cover, affordable fees, greater transparency, fund flexibility, tax savings (as per prevailing regulations), and ease of digitisation.

How much can I save with a new-age ULIP compared to an old one?

The amount you could save depends on the type of ULIP policy you choose, but new-age ULIPs have significantly lower costs than older ones. While many new ULIPs come with no charges for premium allocation, policy administration, fund switching, or partial withdrawals, the fund management charge would be between 0.8% and 1.35%. On the other hand, in older ULIPs, you might have paid premium allocation charges ranging from 3% to 9%, along with various other recurring charges.

Should I switch from my old ULIP to a new-age ULIP?

Switching from a traditional ULIP to a new-age ULIP is usually not financially wise. Old ULIPs are heavily burdened by Premium Allocation Charges and Policy Administration Charges that have already been paid upfront. By surrendering the old policy now, you will lose these fixed charges, while the new policy will have its own lock-in period.

Do new-age ULIPs still have a 5-year lock-in period?

Yes, ULIPs in the new-age category have a compulsory 5-year lock-in period. According to IRDAI (Insurance Regulatory and Development Authority of India) regulations, this lock-in applies to all insurance policies, regardless of the value of premiums or investments.

What fund management charge do new-age ULIPs have?

In new-age ULIPs, fund management charges typically range from 0.8% to 1.35%, depending on the type of unit-linked fund chosen. Compared to older ULIPs, where fund management charges were 1% to 1.35%, some current ULIPs have lower charges for a few funds, helping you retain more of your money within the investment limit set by regulations.

Are new-age ULIPs available online?

Yes, nowadays you can buy modern ULIPs online through the insurer’s official website. This helps investors avoid the involvement of any middleman or agents. Moreover, you can even use aggregator sites to compare ULIPs and make an informed choice.

ARN: July26/Bg/06F

Sources:

https://www.moneycontrol.com/news/opinion/new-age-ulips-how-good-are-these-as-an-investment-option-2560315.html

https://m.economictimes.com/wealth/invest/why-new-age-ulips-are-emerging-as-an-investment-choice/articleshow/124254754.cms

https://www.thehindu.com/business/this-festive-season-invest-smart-via-new-age-ulip/article70204609.ece

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