ULIP vs Life Insurance

Individuals planning to buy insurance are often confused with the choice between Unit Linked Insurance Plans (ULIPs) and Life Insurance policies. Both options serve as an important tool in financial planning. Understanding the fundamental differences between ULIPs and Life Insurance is important for making an informed decision that aligns with your financial goals and circumstances.

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Fund Name

AUM

NAV

Returns (in %)

3 Year

5 Year

10 Year

Midcap Fund

SBI Life

AUM:61,301 Cr

61,301 Cr

NAV

51.71

-0.31%

Returns

18.84%

Highest Returns

Returns

16.93%

Returns

17.02%

Get Details

Opportunities Fund

HDFC Life

AUM:35,005 Cr

35,005 Cr

NAV

81.53

-0.32%

Returns

15.45%

Highest Returns

Returns

13.4%

Returns

14.17%

Get Details

High Growth Pension Fund

Axis Max Life

AUM:37 Cr

37 Cr

NAV

10.5

-0.03%

Returns

22.85%

Highest Returns

Returns

22%

Returns

20%

Get Details

US Technology Advantage Fund

ICICI Prudential Life

AUM:0 Cr

0 Cr

NAV

0.00%

Returns

23.46%

Returns

25.41%

Highest Returns

Get Details

Multi Cap Fund

Tata AIA Life

AUM:11,264 Cr

11,264 Cr

NAV

67.77

-0.14%

Returns

15.69%

Returns

21%

Returns

22%

Highest Returns

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

What are ULIPs?

Unit-Linked Insurance Plans (ULIPs) are a type of investment plan that combines the dual benefits of insurance and investment. ULIPs allow policyholders to invest in a range of funds, including equity, debt, or a combination of both. The premiums paid towards a ULIP are divided into two parts: one for insurance coverage and the other for investment.

What is Life Insurance?

Life Insurance is a contract between you and an insurance company in which you pay the insurance company a regular amount called a premium. In return, if any unforeseen event happens while the policy is active, the insurance company pays the designated beneficiary a sum of money, known as the death benefit. A long-term approach helps identify the best SIP investment, and similarly, life insurance requires thoughtful planning to ensure long-term financial security. This benefit can help your beneficiaries cover expenses like your mortgage, living costs, or even your children's education. Life insurance provides peace of mind, knowing that even if you're not there, your loved ones will be financially protected.

Key Features of ULIPs

Dual Benefit: ULIPs combine investment and insurance into a single product. You get a life cover alongside the opportunity to grow your wealth.
Market-Linked Returns: The investment portion of ULIPs is linked to the market. Your returns depend on the performance of the underlying assets, like stocks and bonds.
Investment Flexibility: ULIPs offer a choice of funds to invest in, catering to different risk appetites. You can choose between equity, debt, or balanced funds.
Fund Switching: ULIPs allow you to switch between funds within the plan. This flexibility helps you adjust your investment strategy based on market conditions.
Partial Withdrawals: ULIPs typically allow partial withdrawals after a lock-in period. This provides liquidity if needed during the policy term.
Top-Ups: You can increase your investment in a ULIP by making top-up payments. This can help you accelerate wealth creation.
Tax Benefits: Premiums paid towards ULIPs qualify for tax deductions under section 80C of the Income Tax Act (subject to applicable tax laws).
Transparency: ULIPs provide regular statements detailing your fund performance, account value, and charges.

Key Features of Life Insurance

Death Benefit: This is the core feature of life insurance. Upon the policyholder's death, a designated beneficiary receives a payout, providing financial security for loved ones.
Maturity Benefit (certain policies): Some life insurance policies, like endowment plans, offer a lump sum payout to the policyholder if they survive the policy term.
Premium Payments: The policyholder pays a regular premium (monthly, quarterly, annually) to keep the policy active.
Policy Term: This is the duration of the life insurance contract. There are various terms available depending on your needs.
Sum Assured: This is the guaranteed death benefit amount paid to the beneficiary.
Policyholder: The person who takes out the policy and pays the premiums.
Nominee: The person designated to receive the death benefit payout.
Riders (optional): These are additional benefits that can be added to a policy for an extra cost, such as accidental death benefit or waiver of premium rider in case of disability.
Tax Benefits: Life insurance premiums qualify for tax deductions and the death benefit payout may be tax-free.

Fund Name	NAV	AUM	5 Yr Returns	10 Yr Returns
SBI Life Balanced Fund	₹73.25	₹20111 Cr	7.59%	9.18%
SBI Life Bond Fund	₹51.67	₹16252 Cr	5.66%	6.54%
SBI Life Equity Fund	₹196.21	₹79317 Cr	9.34%	10.87%
SBI Life Equity Optimiser Fund	₹54.46	₹2556 Cr	9.96%	10.76%
SBI Life Growth Fund	₹94.49	₹2834 Cr	8.65%	10.47%
SBI Life Money Market Fund	₹37.37	₹478 Cr	5.94%	5.93%
SBI Life Top 300 Fund	₹56.12	₹1934 Cr	9.07%	11.34%
SBI Life Pure Fund	₹27.69	₹1212 Cr	8.64%	10.36%
SBI Life Bond Optimiser Fund	₹22.81	₹3264 Cr	7.21%	-
SBI Life Bluechip Fund	₹9.91	₹3434 Cr	-	-
SBI Life Balanced Pension	₹73.54	₹836 Cr	8.24%	10.02%
SBI Life Bond Pension	₹45.91	₹557 Cr	5.52%	6.78%
SBI Life Equity Pension	₹74.98	₹12712 Cr	10.49%	11.85%
SBI Life Growth Pension	₹74.26	₹659 Cr	9.33%	10.98%
SBI Life Money Market Pension	₹34.55	₹153 Cr	5.89%	5.92%
SBI Life Equity Optimiser Pension	₹57.84	₹1020 Cr	9.94%	11.44%
SBI Life Top 300 Pension	₹55.17	₹737 Cr	9.29%	11.54%
SBI Life Midcap Fund	₹51.71	₹61301 Cr	16.93%	17.02%
SBI Life Corporate Bond Fund	₹16.73	₹1035 Cr	5.44%	-
SBI Life Equity Elite II	₹51.5	₹11737 Cr	9.01%	10.46%
SBI Life Index	₹46.6	₹90 Cr	9.33%	10.81%
SBI Life Index Pension	₹48.66	₹25 Cr	9.45%	10.86%
SBI Life Discontinued Policy Fund	₹25.89	₹10629 Cr	5.71%	5.94%
SBI Life Equity Elite	₹87.02	₹12 Cr	11.41%	13.21%
SBI Life P-E Managed	₹38.88	₹200 Cr	8.75%	9.26%
SBI Life Guaranteed Pension GPF070211	₹27	₹2 Cr	5.18%	6.23%
SBI Life Bond Pension II	₹23.91	₹28936 Cr	5.38%	6.13%
SBI Life Equity Pension II	₹41.32	₹11368 Cr	9.33%	11.19%
SBI Life Money Market Pension II	₹21.08	₹1509 Cr	5.66%	5.66%
SBI Life Discontinue Pension Fund	₹21.85	₹6455 Cr	5.72%	-
SBI Life Group Growth Plus Fund	₹57.8	₹3 Cr	8.04%	-
SBI Life Group Debt Plus Fund	₹41.14	₹114 Cr	6.41%	-
SBI Life Group Balance Plus Fund	₹49.08	₹11 Cr	7.22%	-
SBI Life Group Balance Plus Fund II	₹26.97	₹1208 Cr	7.23%	-
SBI Life Group Debt Plus Fund II	₹26.75	₹337 Cr	6.5%	-
SBI Life Group Growth Plus Fund II	₹27.17	₹295 Cr	8.38%	-
SBI Life Group Short Term Plus Fund II	₹22.05	₹19 Cr	6.17%	-
SBI Life Group Money Market Plus Fund	₹14.07	₹2 Cr	3.26%	-
SBI Life Group Balanced Pension Fund	₹10.23	₹128 Cr	-	-

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Difference Between ULIP and Life Insurance

	ULIPs	Life Insurance Policies
Investment Component	Combines insurance with investment. Policyholders can invest in various market-linked funds.	Primarily focused on providing life coverage, with no investment component.
Returns	Returns are market-linked, and you can enjoy the profits.	Fixed returns
Flexibility	Offers flexibility to switch between different funds based on market conditions.	Limited flexibility; usually no options for investment choice.
Risk	Subject to market risks as returns are linked to the performance of underlying funds.	No market risks, as returns are predetermined and guaranteed by the insurance company.
Transparency	Provides transparency in terms of fund performance, charges, and policy value.	Very less transparency
Tax Benefits	Eligible for tax benefits under Section 80C and Section 10(10D) of the Income Tax Act.	Eligible for tax benefits under Section 80C and Section 10(10D) of the Income Tax Act.
Liquidity	Allows partial withdrawals or surrender after a specified lock-in period.	Limited liquidity and withdrawals may be subject to penalties.
Long-Term Perspective	Encourages long-term investment due to market-linked nature.	Usually designed for long-term financial security and stability.

Who Should Invest in ULIPs?

ULIPs are suitable for those with a long investment horizon (10 years or more) as they allow time to ride out market volatility and potentially earn better returns.

Life Cover Seekers: If you need life insurance alongside investment growth, ULIPs can provide a one-stop solution.
Tax-Saving Individuals: Those seeking tax benefits can utilize the tax deductions on premiums paid towards ULIPs (under Section 80C of the Income Tax Act).
Risk-Averse Investors: ULIPs with a balanced fund option can cater to those with a moderate risk appetite, offering a mix of growth potential and stability.
Those Wanting Flexibility: If you value some control over your investment, ULIPs with fund switching options allow you to adjust your strategy based on market conditions.

Who Should Invest in Life Insurance?

Those with spouses, young children, or financially dependent family members benefit greatly. Life insurance ensures loved ones have financial support if you die.
If you have a mortgage, life insurance can help pay it off in case of your death. This ensures your family doesn't lose their home.
Life insurance can replace lost income for your dependents, maintaining their financial stability.
Key person life insurance protects a business if a crucial owner or partner dies. The death benefit can help the business continue.
Life insurance can ensure outstanding debts like student loans don't become a burden for loved ones.
Some life insurance policies accumulate cash value that can be accessed during your lifetime or left as a legacy.

Conclusion

The choice between ULIPs and Life Insurance should be based on an individual's financial goals, risk tolerance, and investment horizon. It's important to carefully evaluate one's needs and consult with a financial advisor like Policybazaar to determine which type of plan or policy aligns best with their long-term objectives and risk appetite.

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FAQs

What type of life insurance products are available?

You can consider purchasing term insurance plans, ULIP plans, child plans, money-back plans, whole life insurance plans, endowment plans, and more, depending on your insurance requirements.
Which one offers better returns?
- Life Insurance: Offers guaranteed, but typically low, returns.
- ULIP: Returns depend on market performance. They can be higher than life insurance but are also subject to market risk.
When should I choose a ULIP?
- You want life cover along with the potential for higher returns.
- You have a long-term investment horizon and can tolerate market fluctuations.
- You understand the concept of risk-reward and are comfortable with some investment risk.
When is life insurance a better option?
- You prioritize guaranteed protection for your loved ones over potential investment returns.
- You have a shorter investment horizon and need stability.
- You are risk-averse and prefer a predictable payout.
Is ULIP better than life insurance?

ULIPs and life insurance are both financial products that can provide financial security for you and your loved ones. ULIPs can be a good option for people who are looking for a financial product that offers both insurance and investment benefits. However, it is important to carefully consider your individual needs and risk appetite before choosing a ULIP.
What is the difference between term life insurance and ULIP?

Term life insurance is a pure protection plan that provides a death benefit to your loved ones in case you pass away during the policy term. ULIPs, on the other hand, are hybrid products that offer both insurance and investment benefits.
Is ULIP a life insurance?

Yes, ULIPs are a type of life insurance. They offer a death benefit to your loved ones in case you pass away during the policy term. However, ULIPs also have an investment component, which means that they can help you grow your wealth over time.