ULIP’s Vs Mutual Funds

Balance Advantage Fund: Protection against volatility
November 23, 2018

ULIP’s Vs Mutual Funds

S.NO POINT OF COMPARISON ULIP Mutual Fund
1 Type of product Insurance + Investment. Only Investment (no life coverage).
2 Tax-savings Premiums paid towards the plan up to Rs.1.5 lakh are tax-free under the Section 80(C). The sum assured paid to the nominee would also be tax-free under the section 10(10D). Only ELSS based investments are tax-free up to Rs.1.5 lakh are tax-free under the Section 80(C).
3 Investment Part insurance – life cover and part invested in equity, hybrid, debts, bonds, equity, etc. Pure Investment.
4 Insurance Life cover is provided. No Life Cover
5 Riders Option to get comprehensive and complete protection by adding riders Not Applicable
6 Returns Chances of moderate to high returns Net Asset Value (NAV) depends on the type of investment funds and on the performance of market. Chances of high returns. Equity oriented investment gives high returns. Depends on the allocation of funds and market performance.
7 Liquidity Need to wait until completion of the lock-in period i.e. 5 years before exit. More liquid, except with ELSS which have a lock-in period of 3 years.
8 When to consider buying When you want to provide financial security, and at the same time ready to accept investment risk. When you have disposal money and wish to gain high returns of sum.
9 Tenure Depends on the investor but for good returns on investment – 10 to 15 years. No specified tenure
10 Ideal Term Long term. Can be short, medium or long term.
11 Ideal Time to buy Can be bought anytime depending on the requirement and amount one wishes to save. When one has less financial burden and have disposal money.
12 Switching Options Flexibility in switching fund allocations. No switching option
13 Lock-in Period 5 years Most of the mutual funds typically do not have any lock-in period, except ELSS which have a lock-in period of 3 years. You can buy and sell mutual funds anytime, closed funds.
14 Security Moderately Secure Not Secure
15 Fund Management Charges Higher in the initial years up to 5 years, and later on 1.35% Charges are 2.5%
16 Long Term Capital Gain tax LTCG are tax free in ULIPS after 5 years ( even investment in debt funds or liquid funds also). LTCG varies from 10% to 20% depending upon scheme. 

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