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Is ULIP and SIP The Same?

Updated On Aug 11, 2021

Most of the people get confused while choosing between SIP and ULIP to invest their money. Firstly, let us know the meaning of ULIP and SIP.

What is Meant By ULIP?

ULIP stands for Unit Linked Insurance Plan. It is a unique financial product as it has both the benefits of insurance and investment in a single policy. The premium paid towards the ULIP is split into two parts. The smaller portion is set aside for covering the life of the policyholder through insurance and the other part is invested in shares or debt funds or in a balanced mix of both, according to the interests of the investor. Therefore, it provides you with an opportunity to earn market-linked returns along with providing insurance.

What is Meant By SIP? 

SIP stands for Systematic Investment Plan. 
In this plan, a person can invest a certain amount(as per his choice) in mutual funds at regular intervals. The SIP can be on a monthly, quarterly, or yearly basis. Therefore, the SIP Investments help you in building a corpus over a period of time. You can start investing even with a meager amount of Rs. 500.

Difference Between ULIP and SIP 

The table below shows the differences between ULIP and SIP according to certain parameters.

Nature It offers dual benefits of life insurance coverage and capital market investment. It offers only the benefit of investment.
Investment Mix ULIPs help you invest in equity shares or debt funds or in a balanced mix of both as per the choice of the individual. The funds are mostly invested in the Equity Market only.
Tax Benefits Under Section 80C of the Income Tax Act,1961, the premium paid towards ULIP is allowed with certain tax benefits and for maturity under Section 10(10D).

Tax exemptions are available only to the Equity Linked Savings Scheme ( ELSS).

Life Cover The premium paid towards the ULIP, is partly utilized to provide life insurance coverage to the policyholder. This is a pure investment scheme and there is no question of life coverage.
Switching Of Funds The investor is allowed free switching of funds up to a limited number of times in a year. The investors are flexible to switch between the funds as per their interests, any number of times.
Regulation ULIPs are regulated by IRDAI SIPs are regulated by SEBI.
Lock-in Period 5 years for ULIPs  3 years for SIP
Fund Management Charges 1.35% 2.50%.
Risk Factor They are comparatively less risky They are comparatively more risky as they are only pure investments


You might have a clear idea on both these instruments by now. Both of these are beneficial in their own ways. The selection of the policy depends on the individual's circumstances, risk appetite and income. The ULIPs offer an additional benefit of life coverage to the investors unlike the SIPs. An SIP investor  needs to buy a separate insurance policy if he/she wishes to stretch for financial protection of his/her loved ones. So when we weigh the advantages of both, the scale tip tilts favorably towards ULIPs.

Must Read: Is ULIP a Good Investment?

Is ULIP Premium Tax Free?

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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