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Differences Between ULIP And Endowment Plans

Published On Jan 04, 2022 10:00 AM By InsuranceDekho

Endowment plans fundamentally offer financial protection against life's risks while also allowing policyholders to save regularly over time. If the policyholder lives to the end of the insurance term, he or she will receive a lump sum payment. If you (the Life assured) die, the life insurance endowment policy pays your family the entire Sum Assured (beneficiaries)

A unit-linked insurance plan, or ULIP, is really a form of insurance that integrates purchasing and coverage within one compact system. ULIPs are insurances that help investors to generate value while ensuring the stability of a life insurance policy. In ULIPs, a share of the subscription is being used to offer insurance coverage to the client. To generate additional long-term prosperity, the leftover earnings are aggregated and deposited in investment and capital instruments, or a blend of the following.

Difference Between ULIP And Endowment Plans

Below are a few differences between ULIP and Endowment Plans:

1. Lock-In Period

Because ULIPs are insurance products, assurers typically set a five-year lock-in term for these investments. Before the lock-in period expires, investors will be unable to redeem their investments. Most Endowment plans do not have a lock-in time, with the exception of ELSS funds, which have a three-year lock-in period.

2. Transparency

As a result of previous IRDAI regulation amendments, ULIPs are becoming more accessible, and now they will provide forward data on money deployment. In the instance of index funds, fund institutions are mandated to submit a detailed report on investing. SEBI, the banking industry supervisor, has urged fund houses and made thorough disclosures about index funds, asset holdings, engaged fund manager(s), prices incurred, and other factors with respect to various programs.

3. Taxation

Depending on the holding period, equity funds are subject to LTCG (long-term capital gains) and STCG (short-term capital gains) taxes of 10% and 15% (with appropriate surcharge and cess) correspondingly. After indexation, the LTCG tax on debt mutual funds is 20% (with appropriate surcharge and cess), whereas STCG tax is based on the investor's income tax bracket. 

Tax on ULIPs: Under Section 10(10D) of the Income Tax Act of 1961, ULIP returns are tax-free.

4. Return On Investment

Because they invest in equities, debt, or a combination of the two, ULIP returns might be unpredictable. Mutual fund returns vary from low to high, depending on the sort of scheme chosen. In mutual funds, there is no assurance of a minimum return.

5. Charges

Once you engage in Endowment plans, you will then be assessed a competent management fee and also operational expenses, which would be defined as an index fund. Many funds charge an excess burden, which would be a price for withdrawing from the fund. Whenever it relates to ULIPs, price allocation fees, wealth management charges, management charges, death charges, and other costs are all applied.


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

Do read - How Are Endowment Plans Useful For Planning Child's Education?

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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