ULIP, or Unit Linked Insurance Plan, is a hybrid financial product that combines life insurance coverage with an investment component, where a portion of your premium goes toward providing life cover, and the remaining portion is invested in market-linked funds of your choice, similar to mutual funds, with the returns depending on how those chosen funds perform.
ULIPs come with their own set of charges — including premium allocation charges, fund management fees, and mortality charges for the insurance component — which can meaningfully eat into overall returns compared to investing directly in mutual funds. Like endowment plans, ULIPs are often criticised by financial advisors for bundling insurance and investment together, since buying a separate term plan for protection and investing directly in mutual funds usually works out more cost-effective for most people.