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Understanding The Difference Between ULIP & SIP

Published On Oct 22, 2021 4:00 PM By InsuranceDekho

When you consider investments and savings, you begin to look into numerous plans that provide you with a variety of advantages for saving your money. Life insurance plans are among the most effective savings and investment options. However, as your financial investigation progresses, you may become perplexed by the differences between ULIPs (Unit Linked Insurance Plans) and SIPs (Systematic Investment Plans).

Don't worry if you're unfamiliar with these terms. To make things easy for you, we'll go through the differences between the two and go over the fundamentals. A new investor or someone who has done some basic research on financial investment will feel more at ease with this information.

ULIPs, or Unit Linked Insurance Plans, are unique financial investment vehicles. When you invest in ULIPs, you get the best of both worlds: insurance and investing. ULIPs allow you to invest in bonds and equities while also providing coverage through an insurance plan.

Whereas as the name implies, a Systematic Investment Plan (SIP) is a method of channeling your money in a systematic way. SIP stands for a systematic investment plan, and it allows you to invest in mutual funds on a monthly, quarterly, or annual basis. SIP stands for a systematic investment plan. Over a period of time, you can accumulate riches.

Understanding The Difference Between ULIP & SIP

Below are a few differences between ULIP & SIP:

  • Dual Benefits

The primary distinction between ULIPs and SIPs is that only ULIPs provide life insurance. This is not a feature of mutual fund SIPs. As a result, when you buy a ULIP, a portion of your money goes into an investing pool, similar to mutual funds. The insurance firm collects funds from all investors and invests them in a variety of ways in order to maximize profits. The remainder of the premium is invested in a life insurance policy.

  • Less Dangerous

Because mutual funds are pure financial products, they are a dangerous option. This is because the investment is exposed to an elevated level of risk in order to generate high returns. ULIPs, on the other hand, are essentially insurance products. As a result, money managers try to avoid high-risk strategies that can imperil your investment.

  • Fund Management Fees Are Reduced

The fund management fees for mutual funds are relatively expensive, at 2.5 percent or more. There are also a slew of other fees, including entry and departure loads, as well as recurring levies. ULIP fund management fees, on the other hand, are substantially cheaper, at roughly 1.35 percent.

  • Features That Save Money On Taxes

The Equity Linked Savings Scheme is the only financial instrument that saves you money in the long term. Under Section 80C of the Income Tax Act, however, any amount (up to Rs 1.5 lakh) can be utilized to minimize ULIP taxes.

  • Death Benefit

In terms of Death Insurance, Only the ULIP includes this benefit. Because ULIP is an insurance product, the policy's beneficiary receives a death benefit if the insured individual passes away within the policy's term. SIPs, on the other hand, are purely investment products with no death benefit.

  • Switching Option

When it comes to changing options, there are a few things to consider. Another distinction between ULIP and SIP plans is the number of beneficiaries. Investors in ULIPs have the ability to switch freely between funds, making them more flexible. Investors in ULIPs have the option of investing in debt, equity, or a combination of the two. SIPs, on the other hand, do not provide this benefit of fund switching, and investors are not permitted to swap funds throughout the investing period.


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.

Also read: 

Things You Need To Know About ULIP Before Investing In It

ULIP Is A Smart Investment Choice

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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