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How Are ULIPs Different From Endowment Plans?

Published On Aug 16, 2021 2:00 AM By InsuranceDekho

 In India, insurance plans awareness and education are pretty low. People usually do not consider anything other than the sum assured, premium, and policy term while purchasing life insurance. The majority of them purchase life insurance coverage based on recommendations from family, friends, and coworkers. So, let's focus on two common and popular life insurance policies in the article, i.e., unit-linked insurance plans and endowment plans, to raise awareness about them. 

What is a Unit-Linked Insurance Plan?

The Unit Linked Insurance Plan, or ULIP, is a financial vehicle that combines insurance with investing. The premium paid for a ULIP is split into two parts. One portion is used to pay for your life insurance, while the other is invested in bonds, stocks, or mutual funds. The amount of coverage provided by life insurance is determined by the sum insured; the bigger the sum insured, the higher the premium. Units in equities, loans, or hybrid funds make up the investment fund. The value of these funds/assets is determined by market conditions. The original sum assured or the net asset worth of all units (whichever is bigger) or both is usually the sum assured.

What is an Endowment Plan?

An endowment plan is a standard life insurance policy that promises a lump sum amount/payout at the conclusion of the life assured's surviving period or upon death. Aside from providing life insurance, an endowment plan can help you save money throughout the course of your investment. The money is released at the policy's maturity date or to the nominated beneficiary. There are two sorts of endowment plans: profit-generating and non-profit-generating. Endowment plans also come in a variety of types, including life insurance, savings, money-back, education, retirement, pensions and so on.

How Are ULIPs Different From Endowment Plans?

Let us see how unit-linked insurance plans are different from endowment plans.

  • Plan Type - Unit-linked insurance plans are insurance-cum-investment plans, whereas endowment plans are insurance-cum-savings plans. 
  • Returns - Since the returns offered by ULIPs are dependent on market performance, they might be higher than the returns on endowment plans which provide a guaranteed fixed amount. 
  • Transparency -  In the case of ULIPs, you will be able to keep track of your complete investment portfolio with ease. However, there is no investment portfolio in endowment plans; hence there is no transparency.
  • Flexibility - You have the option of switching funds, changing your whole investment strategy in ULIPs. In contrast, the endowment plan does not offer any flexibility and changes. 
  • Lock-In Period - The unit-linked insurance plans have a minimum lock-in period of 5 years. In the case of endowment plans, the lock-in period is usually 2-3 years, depending on the policy and premium payment duration.
  • Maturity Benefits - Units can be redeemed in unit-linked insurance plans at the current unit prices. While the sum assured, including any bonuses, will be paid to the policyholder in the endowment plans. 
  • Withdrawal - After the necessary 5-year lock-in term, you can cancel the unit-linked insurance. However, the withdrawal is subject to restrictions and fines in endowment plans.


ULIPs and endowment plans, like any other investment or insurance product, have advantages and disadvantages. It's essential to identify and select a life insurance policy that delivers you the most benefit based on your investment objectives, time horizon, and risk tolerance. So, before you invest, conduct your research and get as much information as possible about these items, and don't forget to read the policy terms and conditions.

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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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