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ULIPs Or Mutual - What To Choose?

Published On Dec 16, 2021

Mutual funds have become one of the most prominent investing tools in recent years. They refer to a group of investors pooling their money to invest in assets like bonds, stocks, money market instruments, and other similar things.

The ULIP (Unit Linked Insurance Plan) is a type of insurance that combines life insurance with investment earnings. A portion of a ULIP's premium is used to provide life insurance, while the rest is invested in equity or debt instruments to produce returns.

ULIPs Or Mutual - What To Choose?

While picking between Mutual Funds and ULIPs might be difficult, we've outlined a few key differences to help you choose the best investment option for your needs.

1. Longer To Break-Even

Due to the longer time it takes to reach break-even, ULIPs take longer to profit.

As a result, both ULIPs and Mutual Funds have their own set of benefits and drawbacks, and a buyer should carefully weigh both choices before investing in either of the aforementioned instruments.

2. Flexibility

Although the unit link insurance plan may be a viable alternative for policyholders, financial gurus say that the lack of flexibility is a drawback. It is preferable to avoid the ULIP if you select a large-cap fund without first checking its underperformance. Understanding ULIP and Mutual Fund updates, as well as low-cost investments such as exchange-traded funds and index funds, can help limit losses.

As a result, many experts believe that separating investment and insurance is a prudent approach, which is fueling the debate over ULIPs or Mutual Funds. Furthermore, many governments begin partial portfolio disclosures, making comparison and categorization processes for funding in similar investment patterns more difficult.

3. Hybrid Characteristics

When examining all aspects of ULIPs and Mutual Funds, it is discovered that ULIPs are a combination of insurance and investing that provides options. You can choose between equity and debt, or you can go for a medium ground that guarantees both debt stability and equity growth.

When comparing the growth costs of ULIPs to mutual funds, mutual funds, unlike ULIPs, do not include insurance components. Furthermore, if you compare the costs of ULIPs and mutual funds, you'll see that TER is charged proportionately on a regular basis, affecting the Net Asset Value.

4. Returns

You should keep an eye on the returns that may assist you in the short and long term when deciding between ULIP and mutual funds. The amount must not be counted due to the provision of life coverage, which has sparked a debate about the mortality charges. In the duel between ULIPs and mutual funds, the NAV returns definitely make mutual funds the winner.

The value of a large-cap mutual fund may grow by 18.83 percent on average, but the value of a large-cap ULIP may only grow by 15.51 percent. In the long run, the difference in value between mutual funds and ULIPs can have a significant influence, and mutual funds are superior at managing investments.

As a result, in the argument over ULIP vs Mutual Fund returns, mutual funds have surpassed unit-linked insurance plans in popularity.

5. Transparency

When it comes to comparing the costs of ULIPs versus mutual funds, mutual funds lose out. Because premium allocation charges, fund switching charges, mortality charges, surrender charges, and other hidden charges are included, ULIP charges are not as clear as they should be.

Organizations must communicate periodic fact sheets to users, together with NAV returns, portfolio mix, and analytics, according to SEBI standards. In the struggle between Mutual Funds and ULIPs, however, ULIPs lose due to a lack of such insights and openness surrounding expenses and portfolio disclosure.


With so many investment alternatives available on the market, you're sure to find a way to build wealth over time. You must, however, invest in a plan that provides financial security while also providing larger returns. ULIPs and mutual funds are frequently compared; nonetheless, each has its own set of characteristics.

Also read - How to Save Taxes With 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.

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