My friend says ULIPs are a scam and I should stick to FDs. Have they actually changed?
Published 22 September 2026
I am 30 and planning to start investing ₹1.5 Lakhs a year for the next 10 years.
I was looking at some low-cost ULIPs like ICICI Pru Signature because of the tax benefits.
My friend warned me that ULIPs are a massive scam that eat up half your money in different fees like AMC charges etc.
He told me to just use an FD instead. Is he right about the fees?
I was looking at some low-cost ULIPs like ICICI Pru Signature because of the tax benefits.
My friend warned me that ULIPs are a massive scam that eat up half your money in different fees like AMC charges etc.
He told me to just use an FD instead. Is he right about the fees?
Your uncle is completely right about how terrible ULIPs used to be but he is talking about a product that essentially no longer exists. Back in the late 2000s ULIPs were aggressively mis-sold because agents were walking away with up to 50% of your first-year premium as commission. They were loaded with four different wealth-destroying fees.
You had premium allocation charges deducted before your money even hit the market. Then you had fund management charges mortality charges and some weird admin fees eating into your returns. For every ₹100 you put in only about ₹60 actually got invested.
It was so bad that it often made mathematical sense to pay the surrender penalty break the ULIP and put the money in an FD instead. But the insurance regulator stepped in around 2015 and completely overhauled the system. They forced upfront premium allocation charges down to zero.
They also capped the fund management charges at 1.35% per year which brings them right in line with active mutual funds. Modern plans like ICICI Pru Signature might still show a ₹500 monthly admin charge but they actually refund all mortality and admin charges at maturity. They even add a 3.25% wealth booster to your fund at the end.
Ironically because the massive 50% commissions are gone most agents simply stopped selling them. Today we have efficient low-cost ULIPs available but very few distributors actually talk about them.
Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.
You had premium allocation charges deducted before your money even hit the market. Then you had fund management charges mortality charges and some weird admin fees eating into your returns. For every ₹100 you put in only about ₹60 actually got invested.
It was so bad that it often made mathematical sense to pay the surrender penalty break the ULIP and put the money in an FD instead. But the insurance regulator stepped in around 2015 and completely overhauled the system. They forced upfront premium allocation charges down to zero.
They also capped the fund management charges at 1.35% per year which brings them right in line with active mutual funds. Modern plans like ICICI Pru Signature might still show a ₹500 monthly admin charge but they actually refund all mortality and admin charges at maturity. They even add a 3.25% wealth booster to your fund at the end.
Ironically because the massive 50% commissions are gone most agents simply stopped selling them. Today we have efficient low-cost ULIPs available but very few distributors actually talk about them.
Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.
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