A ULIP (Unit-linked Insurance Plan) is a type of insurance wherein some portion of your premium is invested in the market and some goes towards your life cover. In this type of insurance, the total sum assured or life cover is relatively lesser than pure term insurance plan. However, the insured gets a return on the funds invested in the insurance. These returns are linked to the market and the investor/insured person is given an option to choose his investment plan i.e. debt based/ equity based depending on his/her risk appetite.
It works similar to that of mutual funds wherein a pool of money is invested in equity/debt or a combination depending on the risk appetite of investor. It also has NAV that keeps fluctuating as per market.