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Why Should One Choose ULIP Over SIP?

Published On Nov 22, 2021

A Unit Linked Insurance Plan, or ULIP, is a type of insurance that is linked to the performance of the stock market. It's a combination of insurance and investing. ULIPs are mutual funds that invest in stocks and bonds and generate returns that are closely tied to market conditions. It's also a good long-term wealth-building tool. A ULIP can also be used to plan for long-term financial objectives such as children's education, marriage, and so on. Premiums are pre-determined by the insurance company and can be used to invest in ULIPs. 

A systematic investment plan, or SIP, is a method of putting money into a mutual fund over time. It allows investors to put a set amount of money into their preferred mutual fund on a monthly basis. Installments as low as INR 500 are possible. In addition, installment frequency can be weekly, monthly, quarterly, or yearly, which is quite versatile. SIPs are best for first-time investors. SIP investments are made at the investor's convenience. In most equity mutual funds, SIPs are recommended. SIPs also assist the investor in achieving his or her financial goals. In addition, over time, it builds up the corpus.

Why Should One Choose ULIP Over SIP?

Below are a few comparisons between ULIP and SIP:

  • In Terms Of Death Benefit 

Only the ULIP offers this benefit. Because ULIP is an insurance product, it pays out a death benefit to the policy's beneficiary if the guaranteed person dies before the policy's expiration date. Investors do not receive a death benefit because the SIP is merely an investing tool.

  • In Terms Of Altering Option

Additional variation among ULIP and SIP initiatives is this. ULIP clients have greater options since they can switch investments at any moment. Participants in ULIPs have the option of investing in loans, stock, or a mixture of the two. During the investing period, SIPs, on the other extreme, do not permit investment or service shifting.

  • In Terms Of Fees

ULIPs are obligated to pay a 1.35 % investment management fee per IRDA rules. The ULIP has extra costs, including rate administration, mortality, and maintenance. SIPs, on the other hand, are subject to a % investment management fee.

  • In Terms Of Risk

Although both investment opportunities are market-linked, they both carry a high risk. In terms of return on equity, the greatest way to achieve long-term financial returns is through ULIPs or SIPs. The SIP plan has a three-year lock-in period, whereas the ULIP has a five-year lock-in duration.

  • In Terms Of Profits

The profits in each financing option are influenced by the fund's market performance. The performance of a ULIP is determined by whether an investor invests in stock, credit, or a combination fund. This characteristic, on the other hand, is immediately visible in SIP. ULIPs are viewed as a much more lucrative investment option for entrepreneurs looking for a safe investment alternative with a moderate to low appetite for risk. Furthermore, ULIP fund managers frequently invest in low-risk fund options to assure the security of the money placed.

  • In Terms Of Tax Advantages

Participating in SIPs may not always result in tax advantages. Only mutual fund equity-linked savings schemes (ELSS) are eligible for tax benefits as per Section 80C of the Income Tax Act, which permits a reduction of up to Rs.1.5 lakh. Under Sections 80C and 10(10D) of the Income Tax Act, the beneficiary can receive a tax rebate on the price charged up to Rs.1.5 lakh, as well as the maturity earnings in ULIPs.


Everybody needs a set quantity of money in the future in their lives. These include the purchases, the schooling of children, the wedding of kids, and retirement life. Furthermore, taking into consideration the present rate of inflation, one must choose investment outlets that will fit their investment model. As a result, there are numerous options for participating in markets while getting back on track with one's financial goals.

Also Read:

How To Buy ULIPs Online?

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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