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Why Should You Choose Term Insurance Over ULIPs?

Published On Jan 10, 2022 10:00 AM By InsuranceDekho

A term insurance policy is the purest type of life insurance, providing financial security to your family in the event of your death. When a policyholder dies while the term plan is still active, the death benefit is paid to the beneficiaries. When compared to other forms of life insurance plans, term life insurance is more economical and has lower rates.There are many different types of term insurance plans from which to choose depending on your financial goals and needs.

A ULIP (Unit Linked Insurance Plan) combines investment and insurance into one package. One premium element, known as a mortality fee, is paid towards the insurance in ULIPs. The other component, on the other hand, is invested in market reserves, securities, debts, values, or hybrids, among other things.

Your fund selection is entirely up to you. ULIPs are known for their flexibility in terms of investing and fund exchange. In layman's words, it means you have the freedom to choose the funds you want to invest in and to switch between them.

In this article, we'll go through each of them to help you better understand life insurance products.

Term Plan vs. ULIP: What's the Difference?

In the article below, ULIPs and term plans are compared:

1. Returns

If the conditions are good, the returns on ULIPs might be fairly significant. Because of their investment and insurance characteristics that promise higher returns, ULIPs obtain the highest rating of all plans.

A term insurance policy covers the most money of any form of insurance policy. This is because it simply provides risk coverage, which is adequate for your protection needs.

2. Transparency

Because there isn't a portfolio of investments, there isn't any investing transparency. ULIPs are thought to be basic and uncomplicated in comparison to other types of insurance. When it comes to learning about investing funds and managing your assets throughout the plan, ULIPs can be a valuable resource. Because they are directly linked to the market and more responsive to risk, ULIPs provide policyholders greater transparency.

3. Affordability

Term plans are the greatest option for investors who wish to save money on premiums because of their low and reasonable rates. Term plans are highlighted as a cost-effective solution in this section because they simply provide insurance coverage. The premium rate is frequently low.

ULIPs have the greatest grade of the two palms due to their investment and insurance qualities.

4. Indicators of Return On Investment

Because their profitability is based on the capital market, these plans might be more expensive, especially if you choose to invest in an equity fund. As a result, long-term investing will offer bigger returns.

You're covered for the maximum amount with a term insurance policy. You are protected since it only covers risk.

5. Investors' Risk Appetite

You can choose from a wide range of risk variables in a ULIP plan. Depending on their risk tolerance and investment objectives, investors can choose from a variety of funds. Risky investments come before big rewards in this technique.


We propose all of the plans described above as excellent insurance coverage options. These plans are suitable for a variety of investors. Any of the programmes listed above can result in a variety of returns and benefits. It all boils down to the investor's expectations and investment objectives in the end. As you can see from the preceding essay, these strategies differ in a number of ways.

Also read - Understanding Public Provident Fund And Its Benefits

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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