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What Are The Differences Between ULIPs And SIPs?

Updated On Dec 09, 2021

Both ULIPs and SIPs have their own set of advantages and disadvantages. To choose the optimal path, you must first evaluate your investment needs and then make a decision. What may be excellent for one investor may not be suitable for another. So, consider your requirements before making a decision.

Because of the similarities between ULIPs and SIPs, they are frequently confused.

  • Both invest in market-oriented securities, which means you'll get market-linked returns.
  • While SIPs refer to investing in small sums at regular intervals, ULIPs also allow you to invest in small amounts on a regular basis during the policy term.
  • Both investment options aggregate funds from several investors and then invest in various assets according to the asset allocation of the fund.
  • Both schemes offer attractive profits.
  • Under Section 80C, investments in ULIPs and ELSS SIPs are both eligible for a deduction of up to INR 1.5 lakhs.
  • Both plans provide a switching feature that allows you to alter your investment funds.
  • Both ULIPs and SIPs allow you to take partial withdrawals.

Understanding The Difference Between ULIPs And SIP

Below are a few distinctions between ULIPs and SIP:

1. Dual Benefits

The most significant difference between ULIPs and SIPs is that only ULIPs offer insurance coverage. SIPs for equity funds do not have this capability. As a consequence, when customers purchase a ULIP, a component of their money is invested in a sum of funds, comparable to mutual funds. To maximize earnings, the insurance corporation gathers monies from all funds that invest them in a number of ways. The remaining premium goes into a life insurance policy.

2. Less Risky

Mutual funds are indeed a risky alternative since they are purely monetary instruments. It's because, in order to generate maximum profit, the investment must be exposed to a high level of risk. ULIPs, on either hand, are insurance-like products. As a reason, financial advisers aim to stay away from high-risk tactics that could put your capital at risk.

3. Fees For Fund Managers Are Being Reduced

Mutual wealth management prices are relatively high, at 2.5 % more than. Other fees include entry and departure charges, as well as periodic charges. ULIP wealth management costs are, on the other hand, far less expensive, averaging around 1.35 %.

4. Tax-Saving Features

The one and only financial instrument that earns you money over the long term is the Equity Linked Savings Scheme. However, any money (up to Rs 1.5 lakh) can be used to reduce ULIP taxes per Section 80C of the Income Tax Act.

5. Death Benefit

Only the ULIP offers death protection. Whereas a ULIP is an insurance scheme, the policy's recipient is entitled to a life insurance policy if the covered person dies within the tax policy’s term. SIPs, on either hand, are strictly investment vehicles with no provision for mortality.

6. Switching Option

There are several factors to consider when switching selections. The beneficiaries are also different among ULIP and SIP schemes. ULIP clients can readily swap among portfolios, providing flexibility. ULIP participants can choose to engage in debt, stock, or a mixture of both. SIPs, on the other side, do not allow for fund flipping, and clients are not allowed to switch funds throughout the investment period.


In Simplest terms, your financial projections and intentions will have an impact on your choice. When it relates to operational and economic administration, ULIPs, on the other hand, is a smart choice. In simple terms, there's a valid reason for it. You purchase life insurance for the first stage. Market-linked profits are also an option. With SIP, there have been no dual advantages.

Do read - What Are The Various ULIP Charges That Exist

How Secure Are 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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