Understanding Loyalty Additions in a ULIP

Insurance and investment plans are important financial products in every person’s life. It will secure your family and increase your wealth. If a financial solution can provide both the benefits in a single product, it is one of the best and cost-effective means to ensure financial security.

Well, it is possible with the ULIP investment! Insurers insist people invest in such products to safeguard their financial position and grow wealth. And, to encourage them and stay invested, they offer loyalty additions! Let us understand what it means in a little detail here.

Before we get started, let us get a brief about ULIP plans.

What is a ULIP Plan?

A ULIP investment is a comprehensive life insurance plan in which one part of the premium provides a life cover, and the other part is invested in financial securities for market-linked returns. It is a flexible policy that provides an option to switch between the funds based on your risk profile and the prevailing market conditions.

Based on your income and future money goals, you can choose the ULIP plan. And using the ULIP calculator, you can estimate the premium based on the sum insured and the policy term.

What is a Loyalty Addition in a ULIP policy?

Loyalty additions refer to the extra amount offered by your insurance provider as a reward for being invested and paying the premiums regularly. Your insurer will add it to the investment corpus. Sometimes, it is referred to as the additional allocation, extra allocation, or the premium booster.

Insurers generally start providing the loyalty additions after ten years of the policy term on every policy anniversary until the end of the policy term. The starting year of providing the loyalty additions varies based on the type of ULIP policy and the terms and conditions of the insurer.

How are Loyalty Additions Calculated and Paid?

Insurance providers calculate loyalty additions of ULIP plans in different ways. For example, it can be a percentage of the premium or the fund value.

The insurer will pay loyalty additions either with the death benefit to your loved ones, on policy maturity, or during the surrender of the ULIP plan as stated in the policy document.

Why are Loyalty Additions Paid in ULIP plans?

ULIP plans are beneficial in the long term as they provide market-linked returns. As a result, the fund value of investments keeps increasing or decreasing based on the global economic conditions. However, these fluctuations in market value get negated in the long term and increase in value. Therefore, insurers provide loyalty additions to establish this real benefit to their customers and keep them invested throughout the policy tenure.

While loyalty addition is a guaranteed benefit, it should not be the only criteria for choosing ULIP insurance. Instead, decide the best policy based on investment choices and flexible features.

For instance, the Tata AIA ULIP policy provides 11 fund options based on different risk profiles and the option to pay the premium for the ULIP policy as a lump sum or periodically for a limited-term while providing regular loyalty additions throughout the policy tenure.


Loyalty addition is an additional sum your insurer provides as a reward for staying invested and paying the premium regularly throughout the policy term. It is introduced to encourage people to purchase ULIP plans and avoid surrendering them during the policy tenure. It is calculated as a percentage of the premium or the fund value based on policy conditions.

The loyalty additions will get added to your investment corpus. Although it is an added benefit to your portfolio, it should not be the primary criterion to choosing a ULIP policy. Instead, understand your steady-flow income future financial commitments, and decide on investing in ULIP plans with flexible features and the best fund options!

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