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Life Insurance Vs ELSS

Published On Dec 11, 2021

The ELSS is an equity mutual fund with a diversified portfolio. The fund invests in the stock market, selecting companies with various market capitalizations. An investor can claim a tax deduction of up to Rs 1,50,000 in a financial year for ELSS investments. A three-year lock-in period is required on certain investments. ELSS is the finest tax-saving investment option since it provides both tax deductions and the opportunity for better returns while having a short lock-in period.

A life insurance policy is a contract between an insurance policyholder and an insurance company in which the insurer agrees to pay a sum of money in exchange for a premium after a specified length of time or upon the death of the insured person. You and your family can be financially protected with life insurance. Optional add-ons including critical illness coverage, accidental death coverage, and more are available with some policies.

Simple life insurance policies need the insured to pay a premium for a specified period of time. The premium you pay helps the insurance company satisfy the financial needs of the insured's family in the event of his or her untimely death. The insured family receives risk coverage in the form of monetary compensation in exchange for the premium paid. We've compared the two methods in this article to help you comprehend them better.

Life Insurance vs ELSS: What Should You Choose

Following is the difference between the two schemes:

  • Product Type

Product that combines insurance and investing

Product that is only for investment.

Must Read: Which Is Better For Investment? Recurring Deposit Or Fixed Deposit?

  • Investment Areas

Securities such as equity, debt, hybrid, and money market instruments are also available.

The majority of the securities are equities and equity-related securities.

  • Returns

Since these funds invest largely in equities, you will almost always outperform the market. According to market experts, ELSS funds can provide returns that are twice or more than a traditional savings plan.

Life Insurance on the other hand is a low-risk saving option that will ensure you a fixed sum assured.

  • Charge

Expenses for mortality, premium allocation, fund management, and administration

Costs of the plan
Loading up (if applicable)

Lock-In Period

With a three-year lock-in term, ELSS funds have one of the shortest lock-in periods of all the tax-saving alternatives.

People sometimes buy insurance policies without completing their homework and then find out they are unhappy with them. In such instances, some insurance companies include a lock-in period, which is a set amount of time, usually 15 days, during which a policyholder can return the policy to the insurer and purchase a new one if they are unhappy with the first.

Tax Treatment

Because they provide equity returns, low costs, transparency, and the shortest lock-in duration of any of the permissible investments, ELSS funds beat other allowed assets for deduction under section 80C of the Internal Revenue Code. A term plan, however, should be considered if you require insurance.

Although the premiums for whole life insurance are tax deductible, buying life insurance merely to save money on taxes is not advised. In this scenario, ELSS is a better money-saving solution.

Risk Profile

ELSS funds invest in stocks, which puts them at a higher risk than traditional alternatives like insurance plans.

ELSS, an exchange-traded fund with a market-linked return. ELSS has the potential to generate much greater wealth over a medium to long-term investing horizon.

Life insurance products are recommended as a risk-free financial backup solution.


As a result, ELSS funds may be the way to go if you want to invest in stocks while still getting tax benefits. ULIPs provides a comparable service. ULIPs are insurance plans that invest in the stock market to give you market-linked profits.

Also Read: Term Insurance - Better Than FD?

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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