Compare & Buy Car, Bike and Health Insurance Online - InsuranceDekho
Track & Policy DownloadLogin

Is ULIP Better Than SIP?

The full version of the Unit Linked Insurance Plan is the Unit Linked Insurance Plan (ULIP). ULIPs are unusual in that they combine the benefits of both investment and insurance into one package. You get protection and the flexibility to diversify your investments between equities and bonds when you buy a ULIP. It essentially allows you to earn market-linked returns while simultaneously providing insurance protection. In addition to long-term wealth growth, ULIPs are a wonderful tool for instilling investment discipline. You can get a good return on your money and apply it toward your long-term financial goals.

SIP, on the other hand, refers to a systematic investment plan as its whole. SIPs allow you to invest a certain amount of money in mutual funds at predetermined intervals. A monthly, quarterly, or annual SIP can be started. SIP Investments, to put it another way, allow you to build a substantial corpus over time with as little as Rs.500.

Is ULIP Better Than SIP?

Below are a few reasons why ULIP is Better Than SIP:

1. Tax Benefits

Investing in SIPs frequently does not bring tax benefits to investors. Only mutual fund equity-linked savings plans (ELSS) qualify for tax deductions under Section 80C of the Income Tax Act, which allows investors to deduct up to Rs.1.5 lakh. The policyholder, on the other hand, can claim a tax credit on the premium paid up to a maximum of Rs.1.5 lakh, as well as the maturity proceeds in ULIPs, under Section 80C and 10(10D) of the Income Tax Act.

2. In Terms Benefits

ULIPs are both an insurance product and a capital growth investment vehicle, which is the most major benefit difference between them and SIP plans. ULIPs, on the other hand, combine insurance and investment benefits. A portion of the premium for a ULIP goes toward the insurance policy, while the other half is invested in market-linked assets in the hopes of making a return. SIP, on the other hand, is a pure investing instrument in which a set amount of money is invested in mutual fund schemes each month in order to generate capital growth and long-term investment returns.

3. In Terms Of Profits

The market performance of the fund determines the returns in both investment options. Whether an investor invests in equity, debt, or hybrid funds determines how well a ULIP performs. In SIP, however, this aspect is easily detectable. For investors seeking a safe investment alternative with a medium to low-risk appetite, ULIPs are seen as a more profitable investment option. Additionally, ULIP fund managers often invest in low-risk fund options to ensure that the money deposited is secure.

4. In Terms Of Fees

Under IRDA rules, ULIPs must pay a 1.35 percent fund management fee. Other fees, such as premium allocation, mortality, and administration, apply to the ULIP. A 2.5 percent fund management fee applies to SIPs, on the other hand.

5. When It Comes To Risk And Lock-In Time

There is a significant risk in both investing options because they are market-linked. Long-term capital returns are best attained through ULIPs or SIPs, in terms of return on investment. The ULIP's lock-in time is five years, while the SIP plan's lock-in period is three years.

6. In Terms Of Death Benefit 

Only the ULIP provides this benefit. Because ULIP is an insurance product, it pays out a death benefit to the policy's beneficiary if the assured individual dies prematurely within the policy's term. SIPs, on the other hand, do not offer investors a death benefit because they are merely investment vehicles.

7. In Terms Of Altering Option

This is yet another difference between ULIP and SIP programs. Investors in ULIPs have more flexibility because they can swap funds at any time. ULIP investors can choose to invest in debt, equity, or a combination of the two. SIPs, on the other hand, do not allow for fund switching or product switching during the investment period.


Any investor is very likely to have a specific amount of money to invest. As a result, carefully identifying the best investment option and making an investment with the purpose of reaping the highest possible profits is a no-brainer. If you want to invest in a SIP or a ULIP, make sure you know the differences and choose the best investing strategy for your financial goals, risk tolerance, and time horizon.

Also read - How to Buy the Best ULIP in India?

Should I invest in ULIPs?

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.

Popularly Opted Term Insurance Sum Assured

People Also Read

Must BuyMust Buy

Why to Buy Life Insurance Policy Online from InsuranceDekho

  • Tax benefit upto 1,50,000*
  • Claim support everyday 10AM-7PM
  • 80 Lacs+ happy customers