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How Are ULIPs Better Than Mutual Funds

Updated On Jun 14, 2021

Two of the most popular ways in which you can invest is via ULIPs and mutual funds. Investments are a great opportunity to further your financial prospects. Essentially, you can save up efficiently for your future plans while earning in the present. Investments also provide for good financial habits. It is easy to go astray and become a spendthrift which is why it is always good to put some of your earnings down for meaningful savings.

ULIPs are generally considered to be better than mutual funds. Read on to find out why.

What are ULIPs?

Unit Linked Insurance Plans or ULIPs are insurance plans that also fulfil the dual role of having an investment and wealth-creation component. They provide opportunities for the policyholder to invest in market-linked funds of their choice. There is incredible flexibility provided by ULIPs. Moreover, they are affordable and help in furthering your financial prospects.

What are Mutual Funds?

Mutual funds are a popular form of investment. In a mutual fund, the money from all policyholder is united in a singular fund which is then put into market-linked investment funds, debt funds and equity funds. The policyholder has no choice of investment funds and their investment is managed by the company. 

Difference Between ULIPs and Mutual Funds

To further understand why ULIPs are better than mutual funds, you must know where their differences lie. Take a look at the following points of differences between these two investment options. 



Mutual Funds

Nature of Plan

Provides dual facilities of investment as well as insurance (life cover, death benefit etc)

Purely an investment plan with no insurance component


Policyholders can choose the kind of market-linked fund they want to invest in and even switch between funds

No choice provided to the policyholder and the funds are entirely managed by the fund managers


Depends on how a particular fund performs in the market and contemporary market trends

Low to moderate returns all across

Lock-in Period

5 years

3 years for only ELSS funds

Tax Benefits

Under Sections 80C and 10(10D) of the Income Tax Act of India and no Long Term Capital Gains Tax

Section 80C applicable for only ELSS funds


It is evident from the above examination, that ULIPs provide more facilities and flexibility to policyholders. Even if you buy it with an intention of having an investment plan, it provides you with an insurance component with life cover and other benefits. Moreover, as a policyholder, you have incredible flexibility with regards to where your money is being invested in. These factors make ULIPs better than Mutual Funds.

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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.

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