ULIP vs SIP - Which is the Best Investment Option?

When it comes to investment options in India, two popular choices that often come up for consideration are Unit Linked Insurance Plans (ULIPs) and Systematic Investment Plans (SIPs). ULIPs and SIPs are both widely used financial products, each offering distinct benefits and features to investors. Understanding the differences between ULIPs and SIPs is crucial for individuals looking to make informed decisions about their investment strategies.

Read more
Best ULIP Plans
  • Guaranteed Tax Savings

    Guaranteed Tax Savings^

    Under sec 80C & 10(10D)
  • savings

    ₹1 Crore

    Invest ₹10k Per Month*
  • Zero LTCG Tax

    Zero LTCG Tax^

    Unlike 10% in Mutual Funds
We are rated~
rating
58.9 Million
Registered Consumer
51
Insurance Partners
26.4 Million
Policies Sold
In-built life cover

Top performing plans with High Returns*

Invest ₹10K/month & Get ₹1 Crore returns*

+91
Secure
We don’t spam
Please wait. We Are Processing..
Your personal information is secure with us
Plans available only for people of Indian origin By clicking on "View Plans" you agree to our Privacy Policy and Terms of use #For a 55 year on investment of 20Lacs #Discount offered by insurance company
Get Updates on WhatsApp
We are rated~
rating
58.9 Million
Registered Consumer
51
Insurance Partners
26.4 Million
Policies Sold

Top ULIP Funds
Fund Name
AUM
Returns (in %)
3 Year
5 Year
10 Year
11,839 Cr
Returns
21.83%
Returns
23.81%
Highest Returns
Returns
19.95%
Get Details
1,772 Cr
Returns
23.15%
Returns
27.3%
Highest Returns
Returns
19.47%
Get Details
6,136 Cr
Returns
26.84%
Returns
27.87%
Highest Returns
Returns
18.81%
Get Details
2,984 Cr
Returns
21.78%
Returns
23.76%
Highest Returns
Returns
17.76%
Get Details
4,172 Cr
Returns
21.74%
Highest Returns
Returns
20%
Returns
17.43%
Get Details
Fund Name
AUM
Returns (in %)
3 Year
5 Year
10 Year
247 Cr
Returns
11.88%
Returns
13.92%
Highest Returns
Returns
11.99%
Get Details
352 Cr
Returns
12.26%
Returns
12.56%
Highest Returns
Returns
11.38%
Get Details
526 Cr
Returns
9.79%
Returns
10.72%
Highest Returns
Returns
10.34%
Get Details
837 Cr
Returns
11.67%
Returns
11.81%
Highest Returns
Returns
10.23%
Get Details
22 Cr
Returns
12.6%
Highest Returns
Returns
11.89%
Returns
10.17%
Get Details
Fund Name
AUM
Returns (in %)
3 Year
5 Year
10 Year
494 Cr
Returns
16.43%
Returns
17.28%
Highest Returns
Returns
15.3%
Get Details
242 Cr
Returns
6.94%
Returns
7.91%
Returns
8.81%
Highest Returns
Get Details
786 Cr
Returns
5.4%
Returns
6.88%
Returns
8.1%
Highest Returns
Get Details
302 Cr
Returns
5.86%
Returns
6.8%
Returns
7.79%
Highest Returns
Get Details
465 Cr
Returns
5.1%
Returns
6.93%
Returns
7.78%
Highest Returns
Get Details

In this article we will talk about the difference between ULIP and SIP.

What is ULIP?

Unit Linked Insurance Plan is a type of life insurance product that combines insurance coverage with investment options. ULIPs are offered by insurance companies and provide policyholders with the dual benefits of insurance protection and the opportunity to invest in various financial instruments such as stocks, bonds, and mutual funds^^.

When an individual purchases a ULIP, a portion of the premium paid goes towards life insurance coverage, while the remaining amount is invested in the chosen investment options. The policyholder has the flexibility to allocate the premium among different investment funds based on their risk appetite and financial goals.

In addition to long-term wealth creation, ULIPs make a great way to inculcate investment discipline. You can enjoy good returns and use the amount invested to meet your long-term financial goals.

What is SIP?

A Systematic Investment Plan (SIP) is an investment strategy that allows individuals to invest a fixed amount of money at regular intervals in a mutual fund or any other investment vehicle. It is a disciplined approach to investing that offers numerous benefits to investors.

An investor chooses a specific mutual fund scheme and decides on the investment amount and frequency (weekly, monthly, or quarterly). The predetermined amount is deducted automatically from the investor's bank account and invested in the chosen mutual fund scheme.

The primary objective of a SIP is to facilitate disciplined and regular investing over an extended period. By investing a fixed sum at regular intervals, investors can benefit from the concept of rupee cost averaging. This means that when the investment amount remains constant, more units are purchased when prices are low and fewer units when prices are high. Over time, this strategy aims to reduce the impact of market volatility on the overall investment.

Invest more and Get more with ULIP Plan Invest more and Get more with ULIP Plan

What is the Difference Between ULIP and SIP

Both ULIP and SIP are financial products available in India, but they serve different purposes and have distinct characteristics. Below are the differences between them:

Parameters ULIP SIP
Instrument Type Offers the combined benefit of  life insurance plus investment Offers the benefit of only investment
Investment Mix In ULIP plans the funds can be invested in equity and debt market In SIP, the funds are majorly invested in the equity market
Tax Benefit Tax Benefit can be availed on the premium paid towards the policy and maturity proceeds under Section 80C and 10(10D) of Income Tax Act Tax exemptions are applicable only on the Equity Linked Savings Scheme (ELSS) up to the maximum limit of Rs.1.5 lakh.  
Life Cover As an investment cum insurance product, ULIP plan offers life cover to the family of the insured As a pure investment option, SIP does not offer the benefit of life cover.
Switching Option Free switches between funds are applicable up to a limited number in a year in ULIP plans. The investors can make free switches between funds.
Death Benefit The death benefit is paid to the beneficiary of the policy in the event of the unfortunate demise of the insured person No death benefit is paid to the investors in SIP.
Investment Regulated By IRDAI SEBI
Lock-in Period 5 years 3 years
Fund Management Charges 1.35% 2.50%

Here is an illustration: 

Mr. Sharma invests Rs. 1 lakh in a ULIP plan, while Mr. Kapoor  buys mutual fund units of the same amount. Every month a portion of Mr. Sharma’s investment goes towards life insurance cover as premium and he gets a cover of Rs. 10 lacs.

Whereas, Mr. Kapoor would need to purchase a separate life insurance policy for life cover and 

In case of Mr. Sharma if he meets with an accidental death or untimely demise, the insurer will recompense his family members with a sum of Rs. 10 lakhs or the fund value, whichever is higher. However, this will not be the case of Mr. Kapoor.

How to calculate the returns on your ULIP and SIP investments?

You can use the SIP calculator to calculate your returns on both the investments.
SIP calculators are helpful tools that simplify the calculation of SIP returns. They consider factors such as the investment amount, duration, expected rate of return, and compounding to estimate the future value of your investments.
You can use Policybazaar’s SIP calculator and enjoy the benefit of knowing your returns on investments. 

What is the Difference on the Basis of Tax Benefits?

Here is a table outlining the difference on the basis of Tax Benefit between ULIP (Unit Linked Insurance Plan) and SIP (Systematic Investment Plan) based on the given information:

Features ULIP SIP
Tax Exemptions Tax benefit on premium paid and maturity proceeds under Section 80C and 10(10D) of the Income Tax Act, up to a maximum limit of Rs.1.5 lakh. It does not offer tax exemptions to investors, except for equity-linked savings schemes (ELSS) under Section 80C, up to a maximum limit of Rs.1.5 lakh.

Factors to Consider Before Deciding Between ULIPs and SIPs

One of the major differences between SIPs and ULIPs is that SIPs do not offer life cover while ULIPs do. Just like mutual funds a portion of your ULIP investments are directed towards an investment pool. The insurer gathers the money from all the investors towards various funds in order to generate higher returns. And the rest of the premium is used for life insurance cover.

When deciding between Unit Linked Insurance Plans (ULIPs) and Systematic Investment Plans (SIPs), there are several factors you should consider. Here are some key points to help you make an informed decision:

  • Objective: Determine your financial goals and investment objectives. ULIPs offer a combination of insurance coverage and investment, while SIPs primarily focus on investment growth. If you prioritize both insurance protection and investment growth, ULIPs may be suitable.

  • Risk Tolerance: Assess your risk tolerance and investment preferences. ULIPs provide various investment fund options with varying risk profiles, ranging from conservative to aggressive. SIPs allow you to invest in mutual funds, which also come with different risk levels. Consider your comfort with market volatility and select an option that aligns with your risk tolerance.

  • Flexibility: Evaluate the flexibility offered by both options. ULIPs generally have a lock-in period of 5 years. On the other hand, SIPs allow you to invest regularly with a lock-in period of 3 years. If you require liquidity or anticipate the need for partial withdrawals, SIPs provide greater flexibility.

  • Insurance Coverage: Consider your insurance needs. ULIPs provide life insurance coverage, ensuring financial protection for your family in case of unfortunate events. If you require life coverage and prefer a bundled product, ULIPs offer a combination of investment and insurance. However, if you already have sufficient insurance coverage through separate policies, SIPs may be more suitable for pure investment purposes.

  • Return Potential: Evaluate the historical performance and potential returns of ULIPs and SIPs. Research the past performance of the investment funds offered within ULIPs and the track record of mutual funds available for SIPs. Remember that past performance is not a guarantee of future returns, but it can provide insights into the investment performance.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Invest in high growth ULIP Plans Invest in high growth ULIP Plans

Which one should you invest in: ULIP or SIP?

If you are stuck in ULIPs vs. SIPs then before investing in any of these two, you need to consider some of the factors that are listed below:

  • Do you need life insurance cover?

  • Your investment horizon

  • Your risk appetite

  • Your financial goals

  • Do you want to save for unforeseen expenses or for retirement?

ULIPs make a suitable investment option for individuals looking for long-term wealth creation and insurance cover. The maturity amount can be used for children’s education, marriage, retirement, and other financial goals. And SIPS make a perfect investment option for those who do not want to time the market and have a long-term investment horizon.

Wrapping it Up!

For any investors, it is very much possible that they have a fixed budget to invest. Therefore, it makes total sense to carefully figure out the best investment option and make an investment with an objective to reap the highest possible returns. If you want to invest in SIP or ULIP, then make sure that you consider these differences and choose the best investment option as per your financial goals, risk appetite, and tenure.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^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
~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.

try our sip calculator
Insurers Offering ULIPs

Tata AIA

Aditya Birla Sun Life

Bajaj Allianz

Max Life

HDFC Life

ICICI Prudential

Bharti AXA Life

Edelweiss Life

Kotak Life

Future Generali

PNB MetLife

SBI Life

Aviva

Bandhan Life

Canara HSBC

IDBI Federal

IndiaFirst

Pramerica Life

Reliance Life

Sahara Life

Shriram Life

Star Union

View more insurers
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
Invest More Get More!
You Get
₹1 Crores*
You Invest
₹10K/month
You Get
₹80 Lakhs*
You Invest
₹8K/month
You Get
₹50 Lakhs*
You Invest
₹5K/month
capital guarantee
Investment Calculator
  • One time
  • Monthly
/ Year
Sensex has given 10% return from 2010 - 2020
You invest
You get
View plans

Ulip plans articles

Recent Articles
Popular Articles
Mortality Charges in ULIPs

16 Jul 2024

Mortality charges in a ULIP (Unit Linked Insurance Plan)
Read more
Benefits of Buying Online ULIP Over Offline ULIP

21 Jun 2024

Unit Linked Insurance Plans (ULIPs) have emerged as a popular
Read more
Why Should ULIPs Be Part of Your Financial Planning in 2024?

19 Jun 2024

Financial planning requires agility and growth potential. ULIPs
Read more
ULIP for Wealth Creation

19 Jun 2024

Unit-linked insurance Plans (ULIPs) are financial products that
Read more
Dynamic Asset Allocation

21 May 2024

Dynamic Asset Allocation involves actively adjusting investment
Read more
ULIP Calculator
  • 08 Oct 2018
  • 121831
A ULIP Calculator is a financial tool designed to help you compare ULIP plans and estimate the maturity amount
Read more
SBI Life Smart Privilege Plan: Benefits & Features
  • 11 Jan 2017
  • 88518
SBI Life Smart Privilege is a unit-linked, non-participating life insurance plan offered by SBI Life Insurance
Read more
7 Things to Know About the Tax Benefits of ULIPs
  • 06 Oct 2021
  • 15070
Nowadays, Unit Linked Insurance Plans, i.e., ULIPs, have evolved as the popular income tax saving investment
Read more
ULIP Returns in 5 Years
  • 06 Dec 2023
  • 1893
ULIP means Unit Linked Insurance Plan. It is a unique financial instrument that combines insurance coverage with
Read more
Taxability of ULIP on Surrender
  • 28 Dec 2023
  • 2093
ULIPs, or Unit Linked Insurance Plans, combine insurance and investment. The taxability of ULIP on surrender
Read more

top

Become a Crorepati

Invest ₹10K/Month & Get ₹1 Crore returns*

Mobile +91
*T&C Applied.
Close
Download the Policybazaar app
to manage all your insurance needs.
INSTALL