Difference Between ULIPs And Endowment Plans
Updated On Jun 14, 2021
Table of Contents
Unit Linked Insurance Plans (ULIPs) and endowment plans are two of the most popular types of insurance plans. They are two distinct types of insurance that have their own share of benefits and disadvantages. Insurance plans are important to sustain your financial stability in the future. To know all about these two types of insurance, read on.
What are ULIPs?
A Unit Linked Insurance Plan or a ULIP provides the dual advantage of wealth creation as well as insurance. It does the former by providing the option for investing in market-linked investment funds. There is also flexibility present as the insured can choose what type of investment fund they want to participate in, depending on their risk appetite and wealth creation ambitions.
What are Endowment Plans?
Another popular type of insurance plan is the endowment plans. It is a fairly traditional life insurance plan with the typical features of maturity and death benefits. There are also riders available which can be added to the basic endowment plan to enhance its cover. It has negligible risk involved and pays out the benefits in lumps sums.
Differences between ULIPs and Endowment Plans
Take a look at the following factors that set ULIPs apart from endowment plans.
|
Parameters |
ULIPs |
Endowment Plans |
|
Facilities Available |
ULIPs provide investment as well as insurance components. The premium is divided into life cover and investment for market-linked investment plans. |
An endowment plan provides lump-sum benefits for maturity as well as the death of the insurer. The maturity period can vary and is chosen by the policyholder. |
|
Lock-in Period |
5 years of compulsory lock-in |
Depends on the premium amount and the premium payment term. |
|
Risk Involved |
The amount of risk can be determined by the policyholder when they choose the type of fund, they want to invest in. |
Negligible risk as there are no high-risk investment funds involved. |
|
Flexibility |
The policyholder can choose the fund where their money is going to be invested in as per their wealth creation goals. |
Flexibility is available in terms of top-ups which can be used to increase the premium and expedite the plan from time to time. |
|
Returns |
Depends on market trends and the investment fund chosen by the policyholder. |
Guaranteed returns in the form of lump sums at death or maturity. |
|
Withdrawal Facilities |
A partial withdrawal facility available and any amount can be taken out anytime after the lock-in period. |
No partial withdrawal facility available and there will be penalties involved if the policyholder withdraws. |
Conclusion
To purchase the right insurance plan, you must carefully consider all personal needs and circumstances. All types of insurance plans have their own features and benefits that cater to certain situations. Make sure to go over all points before choosing an insurance plan.
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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.
