New Age ULIPs are as Good as Mutual Funds

ULIPS or unit linked term plans have been here for quite some time now. In the past decade, ULIP had lost its market shares to the mutual funds^^. With the opening up of insurance, banking, and asset management sector since the dawn of the twenty-first century, the Indian market now has no dearth of investment products.

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Save upto ₹46,800 in Tax under section 80C^{^}
Zero LTCG Tax^¶
In built life cover

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Fund Name

AUM

NAV

Returns (in %)

3 Year

5 Year

10 Year

Equity Fund

SBI

AUM:81,769 Cr

81,769 Cr

NAV

210.13

-1.08%

Returns

12.66%

Returns

14.4%

Highest Returns

Returns

12.54%

Get Details

Opportunities Fund

HDFC Standard

AUM:36,970 Cr

36,970 Cr

NAV

78.94

-0.21%

Returns

17.78%

Returns

20.53%

Highest Returns

Returns

14.88%

Get Details

High Growth Fund

Max Life

AUM:11,792 Cr

11,792 Cr

NAV

118.06

-0.42%

Returns

25.43%

Returns

26.3%

Highest Returns

Returns

19.07%

Get Details

Opportunities Fund

ICICI Prudential

AUM:3,553 Cr

3,553 Cr

NAV

62.33

-0.26%

Returns

15.64%

Returns

17.23%

Highest Returns

Returns

13.4%

Get Details

Multi Cap Fund

Tata AIA

AUM:9,302 Cr

9,302 Cr

NAV

65.44

-0.22%

Returns

18.88%

Returns

22.37%

Highest Returns

Returns

21.09%

Get Details

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Disclaimer :
˜The insurers/plans mentioned are arranged in order of highest to lowest first year premium (sum of individual single premium and individual non-single premium) offered by Policybazaar’s insurer partners offering life insurance investment plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the IRDAI website www.irdai.gov.in

There is an investment product for every type of investor and variety in new age investment scheme is its epitome. ULIP has now entered the new age of investment products, and ULIP portfolio is as actively managed as top mutual fund portfolios.

New Age ULIP and Mutual Fund features

If you are an investor who is seeking to invest in a mutual fund plan, then you can also consider the ULIP schemes. ULIP is an astute amalgamation of investment and life insurance benefits into one plan. So if you purchase a ULIP plan, you will be getting not only an investment scheme but also a life insurance cover. New age ULIPs are being offered in many possible varieties like the mutual funds, but mutual fund schemes do not include personal life cover though some mutual fund schemes do offer group life insurance cover under certain conditions. Under the new age ULIP plan, both the life cover and investment plans offer a number of choices. Thus life cover under a ULIP policy can be pure life cover or life cover with additional benefits like accident, health or critical illnesses cover, survival benefit, maturity benefit, and other benefits.

The invested component of ULIP plan is like a mutual fund portfolio. ULIP fund manager invests the apportioned premium into investment instruments. New age ULIPs offer variety in the investment part as well. Thus like the different categories of a mutual fund, the invested part of a ULIP plan can have different types of investment instruments as according to the invested portfolio objectives. ULIPs can invest in equity and debt instruments or both. Equity composition in a ULIP fund can be large, mid, small cap. Like the mutual fund plans ULIPs can also offer differentiated risk/return portfolios.

Some new age ULIPS are offering returns on mortality charges; one such NULIP is Bajaj Allianz life goal assure. Mortality charges in a ULIP plan are used for providing life cover. Return of mortality charges imply returns of the entire amount charged for life cover at ULIP maturity.

New Age ULIP and Mutual Fund returns

New age ULIPs are yielding returns as good as the top ranking mutual funds of the country. ULIPs funds are constructed with the objective of long-term returns, and some NULIPs are yielding above 20 % returns over five year horizon period. The top-performing equity mutual funds are at present yielding around 18 to 19 % annualized returns over the five-year investment horizon. Check the returns of the modern ULIPs using the Policy Bazaar instant calculator. At the Policy Bazaar portal, you can access returns and the salient features of top ULIPs schemes within seconds using the online calculator. For calculating the returns access the Policy Bazaar portal here. Scroll down to ULIPs calculator and select the company and ULIP plan from the drop-down menus and click on calculate tab. The portal will return you the growth of the fund as returns for one, three and five year periods. Other pertinent fund features also get displayed alongside including fund type (whether moderate or high risk), fund objective definition. For example, if under a company name you choose Aviva life insurance, under plan name you choose ‘i Maximize plan’ (out of total three plans), and then you click calculate. Under fund name, you will get four types of the fund for this plan (Debt fund, secure fund, blue-chip equity fund, stable fund, accelerator fund). Returns of the plan vary as per type of fund. Five-year returns for the plan are within 8% to 12.3 % range.

New Age ULIP and Mutual Fund portfolio

The ULIP portfolio can have portfolio options of pure equity, pure debt or hybrid. In comparison mutual fund portfolio schemes are offering more varieties in the portfolio, mutual fund portfolios have base categorization and sub-categorization within a particular category. The mutual fund portfolio is much more diversified than the ULIP portfolio. The new age ULIPs, however, have started offering greater diversification of investment portfolio, especially the equity-based ULIPs.

New Age ULIP and Mutual Fund tax treatment

All ULIP schemes are tax-free. Under section 80 c tax payer can deduct the amount contributed in ULIP scheme from taxable income and reduced taxable income base. Under section 10 of the income tax act, ULIP returns are not taxed for long-term capital gains tax. Returns earned for ULIP scheme is entirely exempt from tax. The amount received at maturity of ULIP scheme is not taxable. Mutual funds, on the other hand, are not all exempt from tax. Till this financial year ELSS mutual funds were tax-free, but from the next tax year LGCT of 10 % on ELSS returns above Rs 1 lakh a year will be charged, however, tax deduction benefit for ELSS will continue to apply under section 80 c.

Fund switching in ULIP and Mutual Fund

ULIPs offer a number of free switches between funds in a year which can be up to four free switches. An investor can switch between an equity, debt or hybrid fund in the same ULIP without having to pay any additional charges. There is no concept of fund switching in mutual funds. If one wants to switch a mutual fund, then the entire scheme needs to be closed, and a new one opened.

Fund Name	NAV	AUM	5 Yr Returns	10 Yr Returns
SBI Life Balanced Fund	₹73.34	₹22084 Cr	8.63%	10.26%
SBI Life Bond Fund	₹50.23	₹17457 Cr	5.24%	6.88%
SBI Life Equity Fund	₹200.24	₹83975 Cr	11.74%	12.49%
SBI Life Equity Optimiser Fund	₹54.84	₹2728 Cr	11.92%	12.08%
SBI Life Growth Fund	₹94.27	₹3040 Cr	10.52%	11.78%
SBI Life Money Market Fund	₹36.35	₹434 Cr	5.68%	6.04%
SBI Life Top 300 Fund	₹57.07	₹2025 Cr	11.3%	12.87%
SBI Life Pure Fund	₹25.83	₹1192 Cr	10.13%	-
SBI Life Bond Optimiser Fund	₹22.32	₹3285 Cr	7.36%	-
SBI Life Bluechip Fund	₹9.97	₹3014 Cr	-	-
SBI Life Balanced Pension	₹73.51	₹807 Cr	9.18%	11.09%
SBI Life Bond Pension	₹44.56	₹526 Cr	5.11%	7.13%
SBI Life Equity Pension	₹74.8	₹11823 Cr	12.72%	13.24%
SBI Life Growth Pension	₹73.37	₹634 Cr	11.01%	12.24%
SBI Life Money Market Pension	₹33.6	₹138 Cr	5.63%	6.04%
SBI Life Equity Optimiser Pension	₹58.7	₹989 Cr	11.87%	12.87%
SBI Life Top 300 Pension	₹55.23	₹716 Cr	11.26%	12.9%
SBI Life Midcap Fund	₹47.42	₹52995 Cr	19.67%	-
SBI Life Corporate Bond Fund	₹16.3	₹1049 Cr	5.27%	-
SBI Life Equity Elite II	₹51.9	₹12638 Cr	10.86%	11.92%
SBI Life Index	₹48.57	₹112 Cr	12.28%	12.87%
SBI Life Index Pension	₹50.7	₹30 Cr	12.38%	12.9%
SBI Life Discontinued Policy Fund	₹25.23	₹9697 Cr	5.58%	6.09%
SBI Life Equity Elite	₹88.79	₹13 Cr	14%	14.87%
SBI Life P-E Managed	₹38.68	₹231 Cr	9.73%	10.53%
SBI Life Guaranteed Pension GPF070211	₹26.37	₹3 Cr	5.08%	6.83%
SBI Life Bond Pension II	₹23.3	₹29479 Cr	5.03%	6.51%
SBI Life Equity Pension II	₹42.38	₹12763 Cr	12.03%	12.98%
SBI Life Money Market Pension II	₹20.53	₹1549 Cr	5.38%	5.76%
SBI Life Discontinue Pension Fund	₹21.29	₹6566 Cr	5.56%	-
SBI Life Group Growth Plus Fund	₹57.21	₹3 Cr	8.93%	-
SBI Life Group Debt Plus Fund	₹40.17	₹113 Cr	6.34%	-
SBI Life Group Balance Plus Fund	₹48.23	₹11 Cr	7.49%	-
SBI Life Group Balance Plus Fund II	₹26.43	₹809 Cr	7.46%	-
SBI Life Group Debt Plus Fund II	₹26.02	₹232 Cr	6.33%	-
SBI Life Group Growth Plus Fund II	₹26.73	₹240 Cr	9.02%	-
SBI Life Group Short Term Plus Fund II	₹21.38	₹21 Cr	5.9%	-
SBI Life Group Money Market Plus Fund	₹12.44	₹2 Cr	1.03%	-

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Redemption of ULIP and Mutual Fund

Like open-ended mutual funds, ULIP funds also comprise of open-ended units which can be redeemed on their NAV value. ULIP units can be redeemed after lock-in period of five years or some new age ULIPs after lock-in of three years. If an investor wants to invest more amounts in ULIP fund then s/he can purchase more of ULIP fund units. Thus investment in a ULIP scheme can be increased or decreased after the lock-in period.

Lock in period of ULIP and Mutual Fund

The lock-in period of ULIPs used to be five years, but now several new age ULIP schemes have shortened the lock-in period to three years. The lock-in period for ULIP is different from maturity period. ULIP maturity period can be ten or fifteen years. Most mutual funds also have a lock-in period of three years. There is no concept of mutual fund maturity. During the lock-in period, funds cannot be withdrawn from the scheme. Should funds need to be withdrawn before the lock in the period then exit load is levied by asset management company. There is another disadvantage of withdrawing funds from ULIP or mutual fund before lock-in period, and that is tax deductions get reversed. If ULIP of a mutual fund is surrendered before lock-in, then earlier deductions get reversed and are treated as income in the next tax year. If the amount is withdrawn from investment scheme before lock in, then the same is taxable.

SIP option in ULIP and Mutual Fund

Both ULIP and mutual fund offer options to invest a monthly periodic fixed amount instead of a lump sum amount, and just as selecting the best SIP plan requires aligning investments with goals, ULIP premiums can also be paid monthly like SIPs in a mutual fund scheme, supporting disciplined and goal-oriented investing.

Withdrawal options in ULIP and Mutual Fund

ULIP schemes also offer facilities of withdrawal after lock-in a period like the mutual fund schemes. Some new age ULIPs are offering withdrawal of maturity benefits after each five years period before the maturity tenure of ten or fifteen years. The withdrawal benefits of new age ULIP plans match the systematic withdrawal feature of mutual fund schemes.

Fund Management charges in ULIPS and Mutual Funds

The fund management charges of ULIPs are not very much different from the expense ratio of mutual fund schemes. Regular mutual fund schemes have an expense ratio of 2 to 2.5 %. The expense ratio for direct mutual fund schemes is lower between 1 to 1.5%. The fund management charges of ULIPs are around 1.5 %. Certain ULIP plans may levy charges other than fund management, for the complete ULIP package benefits and ULIP plan riders. However, the new age ULIPs performance is far overriding the costs. For all types of ULIPs, the fund management charges cannot exceed 2.25 % annually as per the 2010 IRDA cap regulations on ULIP fund charges.

ULIP and Mutual Fund Group Plans

There is no concept of group plan under a mutual fund scheme. Mutual fund investment is mostly a personal investment decision. However mutual fund account holder can register a nominee for his or her account. The new age ULIPs have certainly added and modified several features to make ULIP investment more gainful for the investors yet not all past features of the old ULIPs have been suspended. One salient benefit of old Ulips was an umbrella plan policy for the entire family needs including life cover, investment growth, cash for important life events, health and accident cover, retirement planning, among others. The new age ULIPs pack all these covers into one single investment product, like the old ULIPs. No other investment product packs all benefits so comprehensively in a single product for the entire family.

Online purchase of ULIPs and Mutual Fund schemes

The new age ULIP schemes are now available online like the mutual fund investment products. Online ULIPs can be purchased directly from the asset management company online portal or investors may also visit the Policy Bazaar portal. On the Policy Bazaar investment aggregator portal, investors can use the portal tools and online portal calculator to conduct a quick and swift comparison of the ULIPs and mutual fund schemes. Policy Bazaar is a customer-focussed portal. Investors can open their accounts on the Policy bazaar portal and keep track of all transactions and record of investment schemes purchased through the portal.

ULIP and Mutual Fund purchase decision

There is no hard and fast rule that if you buy a ULIP scheme, you cannot buy a mutual fund scheme or vice versa. Since IRDA suggested ULIP companies to make the ULIPs more competitive, the new age ULIPs are matching the mutual fund scheme returns. Yet a ULIP scheme is not all investments, it’s a complete life plan for the whole family, and whereas mutual funds are taxed ULIP investments qualify for tax deduction benefits and ULIP returns are tax exempt. A ULIP investment can be considered as the primary family life plan to meet all the financial goals in the various life stages of the family. Mutual fund investments can be made any time. Mutual funds still do offer greater liquidity than the ULIPs. Short-term debt based mutual funds have lock-in of only one year; the equity-based mutual funds though have a lock-in of three years.

To Conclude:

The new age ULIPs have undergone a turnaround to offer benefits at par with other investment options like the mutual funds. The essential features of new age Ulips that make these a chosen investment solution include the following:

Complete life plan
Life cover, health cover, wealth accrual
Comprehensive apportionment
Low cost of the scheme
High returns on investment
Choice of the investment portfolio
Free fund switches
Open-ended fund
Withdrawal privileges before fund maturity
Tax deduction and tax exemption benefits

˜The insurers/plans mentioned are arranged in order of highest to lowest first year premium (sum of individual single premium and individual non-single premium) offered by Policybazaar’s insurer partners offering life insurance investment plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the IRDAI website www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
++Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.