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How Is ULIP Different From SIP?

Updated On Oct 25, 2021

When you consider investments and savings, you begin to look at numerous schemes that provide you with various advantages for saving money. Life insurance plans are among the best savings and investment possibilities. However, as your financial investigation progresses, you may become confused between ULIPs (Unit Linked Insurance Plans) and SIPs (Systematic Investment Plans) (Systematic Investment Plans).

Don't be concerned if you've never heard of these terms before. We'll go over the differences between the two and go over the fundamentals to make it easy for you. A new investor or someone who has done some basic research on financial investments can feel at rest with this knowledge.

In this approach, ULIP returns are connected to the security of an insurance policy. ULIPs can help you establish investment discipline in addition to growing your money. ULIPs are an excellent way to save for long-term financial goals.

You should use SIP to save for a long-term financial or life goal. SIP has the advantage of allowing you to invest as little as Rs 500. SIP is a viable alternative for everybody, including students and those who have recently begun working.

How Is ULIP Different From SIP?

Below are a few differences between ULIps and SIP:

1. Additional Benefits

Following the expiration of the lock-in period, ULIPs offer loyalty incentives as well as the issuing of extra fund units.

SIPs do not provide any further benefits.

2. Flexibility

Flexibility in selecting how much of your money should go toward life insurance and how much should go toward ULIPs.

Flexibility in terms of increasing or decreasing the amount of money invested in a SIP for long-term advantage.

3. Tax Benefits

In ULIPs, tax advantages are available on the premium paid and the maturity funds under Sections 80C and 10(10D) of the Income Tax Act.

In a SIP, there are no tax advantages. Exemptions, however, are only available on the Equity Linked Savings Scheme (ELSS) up to a maximum of Rs.1.5 lakh in SIP.

4. Investing Goals

Systematic Investment Plans, or SIPs, are a popular way to invest in mutual funds. SIPs for equity-oriented funds account for the vast majority of SIPs. ULIPs combine investment and life insurance protection for the investor. ULIPs can be used to invest in stocks, bonds, or hybrid funds. Under the right circumstances, both of these approaches work differently to get you larger returns.

5. Returns-oriented

Mutual funds are used for SIP investments. As a result, they are exposed to market risks, which have an impact on the performance of the fund. It's a long-term investment option in which the amount invested can be increased or lowered based on the investor's choices, which impacts the SIP investment's returns. A portion of the ULIP premium is invested in financial markets such as equity, debt, stocks, and so on to produce profits, while the rest is put in a life insurance policy to generate returns. It enables investors to switch between funds according to their goals and risk tolerances.

6. Lock-In Period

ULIPs have a five-year lock-in period.

ELSS Mutual Funds have been the only investment vehicles with a 3 lock-in period.

7. Depending On Your Tolerance For Risk

Investing in these programs should be dependent on the tolerance for risk of the investor. Mutual funds have a higher risk profile than ULIPs since they are basically financial products.

Mutual funds are indeed a wiser choice because they are purely monetary instruments. Its because, in order to produce high returns, the portfolio is exposed to a higher level of risk.

Because they participate in capital markets, mutual fund SIPs and ULIPs are both exposed to market risks.


The next obvious step after comparing SIP and ULIP is to decide which to invest in. Simply expressed, your financial goals and intentions will influence your decision. ULIPs, on the other hand, are a good solution when it comes to technical and financial management. In plain terms, there is a good rationale for it. As a first step, you obtain life insurance. Additionally, market-linked returns are an option. There are no dual advantages with SIP. The bottom line is that ULIPs eliminate the need to purchase two financial products for insurance and investing separately. SIP is also a smart alternative if you don't think about insurance much or if you don't mind owning two different financial products. Another advantage of SIP is that it is an excellent tool for beginning investors because it allows you to begin with a small amount.

You may also like to read - Why One Should Not Exit ULIPs?

5 ULIP Charges You Must Know About

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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