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A Detailed Comparison Of ULIP WIth Endowment Plans

Updated On Feb 11, 2022

The Unit Linked Insurance Plan (ULIP) is a financial vehicle that combines insurance and investment. The premium paid for a ULIP is divided into two components. One component is used to provide life insurance coverage, while the other is invested in goods such as bonds, equities, or mutual funds. The premium for life insurance is determined by the sum insured; the bigger the sum insured, the higher the premium. The investment fund is made up of units in stocks, bonds, and hybrid funds. The value of such funds/assets is determined by market conditions. Typically, the sum insured is the original sum insured or the net asset worth of all units (whichever is greater), or both.

A Detailed Comparison Of ULIP WIth Endowment Plans

An endowment plan is a standard life insurance policy that guarantees a lump sum amount/payout after the policyholder's survival period or death. Aside from providing life insurance, an endowment plan can help you save money throughout the course of your investment. The saved amount is delivered upon policy maturity or to the named beneficiary/nominee. Endowment plans are classified into two types: profit-generating and non-profit-generating. Endowment plans also come in a variety of flavours, including life insurance, savings, retirement, pension, education, money-back, and so on.

What Is the Difference Between ULIPs and Endowment Plans?

The following are some distinctions between ULIPs and Endowment Plans:

Lock-In Period

Because ULIPs are insurance products, assurers usually impose a five-year lock-in period on these investments. Investors will be unable to redeem their assets before the lock-in period expires. With the exception of ELSS funds, which have a three-year lock-in period, most endowment plans do not have a lock-in period.


Equity funds are subject to LTCG (long-term capital gains) and STCG (short-term capital gains) taxes of 10% and 15% (with applicable surcharge and cess) depending on the holding period. After indexation, the LTCG tax on debt mutual funds is 20% (plus the relevant surcharge and cess), but the STCG tax is determined by the investor's tax bracket. ULIP taxation: ULIP returns are tax-free under Section 10(10D) of the Income Tax Act of 1961.

ROI (Return on Investment)

Because ULIPs invest in equities, debt, or a combination of the two, their returns can be volatile. The returns on mutual funds range from low to high, depending on the type of scheme chosen. There is no guarantee of a minimum return in mutual funds.


When you participate in Endowment plans, you will be charged a competent management fee as well as operational charges, which will be specified as an index fund. Many funds levy an excess burden as a penalty for withdrawing from the fund. Price allocation fees, wealth management charges, management charges, death charges, and other costs are all imposed when it comes to ULIPs.


An endowment policy, like a unit-linked insurance plan, is one of the most popular life insurance policies in India since it provides both investment and life coverage (ULIP). When you invest in an endowment policy, you get life insurance as well as money saved for your or your child's future. When the policyholder dies, the money insured (the sum assured) is given to the policyholder's family or representative. If the policyholder survives the policy's term, he will get the full amount of vesting as well as any bonus on the money deposited. It can also be used to deduct taxes under Sections 80C and 10D of the Income Tax Act.

Also read: Top Five Benefits Of Purchasing An Endowment Policy

Know How Endowment Policy Helps In Wealth Creation

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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