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ULIP vs ETF: What's the Difference and Which One Should You Pick?
If you have been researching investments lately, chances are you have come across both ULIPs and ETFs. At first glance, both seem to grow your money through the market — so what is really the difference? Quite a lot, actually. One is a bundled financial product, the other is as straightforward as investing gets. Here is everything broken down in plain language.
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- Ulip Plans
- ULIP vs ETF
List of ULIP Funds ~
Fund Name
AUM
NAV
Returns (in %)
3 Year
5 Year
10 Year
Midcap Fund
SBI Life
AUM:59,296 Cr
59,296 Cr
NAV
51.76
-0.26%
Returns
19.2%
Highest Returns
Opportunities Fund
HDFC Life
AUM:35,005 Cr
35,005 Cr
NAV
81.39
-0.41%
Returns
15.69%
Highest Returns
High Growth Pension Fund
Axis Max Life
AUM:32 Cr
32 Cr
NAV
10.58
-0.06%
Returns
22.85%
Highest Returns
US Technology Advantage Fund
ICICI Prudential Life
AUM:0 Cr
0 Cr
NAV
0.00%
Returns
-
Multi Cap Fund
Tata AIA Life
AUM:10,835 Cr
10,835 Cr
NAV
67.87
-0.33%
Returns
16.19%
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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 is ULIP?
A ULIP (Unit Linked Insurance Plan) is not just an investment. It is a package deal: part of your premium buys you life cover, and the rest goes into funds you choose, like, equity, debt, or a balanced mix.
The catch? ULIPs carry multiple layers of charges. Mortality charges, admin fees, fund management costs and all of these come out of your money before it actually starts working for you.
A few things worth knowing:
- Your money stays locked in for 5 years and there is no early exits
- Returns move with the market, nothing is fixed or promised
- You can claim a Section 80C deduction under the old tax regime
- Maturity proceeds can be tax-free, subject to conditions
- You can switch between fund types within the plan
What are ETFs?
An ETF (Exchange Traded Fund) tracks a market index like the Nifty 50, Sensex, or others. Buy one unit, and you automatically own a slice of every company in that index.
There is no insurance, no bundling, no complexity. Just direct market exposure at a very low cost.
Here is how it works in practice:
- Bought and sold on the stock exchange like any share
- No lock-in, you can exit on any trading day
- Costs are minimal: just a small expense ratio
- Everything is visible, prices, holdings, performance, in real time
- No tax deduction benefit, but capital gains rules apply on exit
Comparing ULIP vs ETFs
| Feature | ULIP | ETF |
| What it does | Insurance + Investment | Investment only |
| Returns | Market-linked, minus charges | Market-linked, low cost drag |
| Lock-in | 5 years, no exceptions | None — fully flexible |
| Charges | Multiple — mortality, admin, fund fees | Just expense ratio |
| Tax Benefit | Section 80C (old regime) | No upfront deduction |
| Liquidity | Restricted in early years | Exit any trading day |
| Transparency | Moderate | Complete |
| Life Cover | Yes | No |
The Charges Gap
Both products are market-linked, so people often assume returns will be similar. They are not, and charges are the reason.
A ULIP deducts multiple fees before your money even enters the fund. Over 15 to 20 years, these charges quietly reduce what you actually walk away with. An ETF has one of the lowest cost structures of any financial product available today. That gap compounds significantly over time, and it shows in the final corpus.
-
ULIP Makes Sense If:
- A combined product for insurance and savings is what you are after
- You are in it for the long haul, like 10 to 15 years minimum
- Saving tax under Section 80C is part of your plan
- You prefer a more structured, hands-off approach to investing
- The 5-year lock-in does not bother you
-
ETF Makes Sense If:
- You already have a term plan and just need to grow your money
- Low costs and maximum flexibility are non-negotiable for you
- You want to track exactly where every rupee is going
- Short or medium term goals are on the table, no lock-in suits you
- You are comfortable with market ups and downs
Latest ULIP NAVs
| Fund Name | NAV  |
AUM |
5 Yr Returns |
10 Yr Returns | |
|---|---|---|---|---|---|
| SBI Life Balanced Fund | ₹73 | ₹19882 Cr | 7.33% | 9.19% | |
| SBI Life Bond Fund | ₹51.67 | ₹16422 Cr | 5.71% | 6.57% | |
| SBI Life Equity Fund | ₹195.16 | ₹76974 Cr | 8.83% | 10.88% | |
| SBI Life Equity Optimiser Fund | ₹54.21 | ₹2503 Cr | 9.55% | 10.76% | |
| SBI Life Growth Fund | ₹94.27 | ₹2777 Cr | 8.33% | 10.5% | |
| SBI Life Money Market Fund | ₹37.34 | ₹501 Cr | 5.93% | 5.93% | |
| SBI Life Top 300 Fund | ₹55.88 | ₹1903 Cr | 8.68% | 11.34% | |
| SBI Life Pure Fund | ₹27.51 | ₹1197 Cr | 8.35% | 10.36% | |
| SBI Life Bond Optimiser Fund | ₹22.79 | ₹3207 Cr | 7.15% | - | |
| SBI Life Bluechip Fund | ₹9.85 | ₹3289 Cr | - | - | |
| SBI Life Balanced Pension | ₹73.3 | ₹808 Cr | 7.97% | 10.02% | |
| SBI Life Bond Pension | ₹45.92 | ₹546 Cr | 5.56% | 6.81% | |
| SBI Life Equity Pension | ₹74.73 | ₹12146 Cr | 10.01% | 11.89% | |
| SBI Life Growth Pension | ₹74.1 | ₹634 Cr | 9% | 11.01% | |
| SBI Life Money Market Pension | ₹34.52 | ₹151 Cr | 5.89% | 5.92% | |
| SBI Life Equity Optimiser Pension | ₹57.55 | ₹980 Cr | 9.49% | 11.43% | |
| SBI Life Top 300 Pension | ₹55.03 | ₹720 Cr | 8.94% | 11.55% | |
| SBI Life Midcap Fund | ₹51.76 | ₹59296 Cr | 16.69% | 17.17% | |
| SBI Life Corporate Bond Fund | ₹16.72 | ₹1031 Cr | 5.48% | - | |
| SBI Life Equity Elite II | ₹51.21 | ₹11536 Cr | 8.59% | 10.44% | |
| SBI Life Index | ₹46.25 | ₹90 Cr | 8.85% | 10.76% | |
| SBI Life Index Pension | ₹48.3 | ₹25 Cr | 8.98% | 10.81% | |
| SBI Life Discontinued Policy Fund | ₹25.86 | ₹10597 Cr | 5.72% | 5.94% | |
| SBI Life Equity Elite | ₹86.4 | ₹12 Cr | 11.31% | 13.17% | |
| SBI Life P-E Managed | ₹38.73 | ₹199 Cr | 8.43% | 9.26% | |
| SBI Life Guaranteed Pension GPF070211 | ₹27.04 | ₹2 Cr | 5.25% | 6.28% | |
| SBI Life Bond Pension II | ₹23.91 | ₹28624 Cr | 5.43% | 6.16% | |
| SBI Life Equity Pension II | ₹41.11 | ₹11046 Cr | 8.81% | 11.2% | |
| SBI Life Money Market Pension II | ₹21.07 | ₹1524 Cr | 5.65% | 5.66% | |
| SBI Life Discontinue Pension Fund | ₹21.83 | ₹6502 Cr | 5.74% | - | |
| SBI Life Group Growth Plus Fund | ₹57.6 | ₹3 Cr | 7.8% | - | |
| SBI Life Group Debt Plus Fund | ₹41.1 | ₹112 Cr | 6.4% | - | |
| SBI Life Group Balance Plus Fund | ₹48.99 | ₹10 Cr | 7.11% | - | |
| SBI Life Group Balance Plus Fund II | ₹26.92 | ₹1066 Cr | 7.13% | - | |
| SBI Life Group Debt Plus Fund II | ₹26.72 | ₹323 Cr | 6.49% | - | |
| SBI Life Group Growth Plus Fund II | ₹27.08 | ₹288 Cr | 8.14% | - | |
| SBI Life Group Short Term Plus Fund II | ₹22.05 | ₹19 Cr | 6.2% | - | |
| SBI Life Group Money Market Plus Fund | ₹14.06 | ₹2 Cr | 3.26% | - | |
| SBI Life Group Balanced Pension Fund | ₹10.21 | ₹125 Cr | - | - |
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Bottom Line
These two products are not really fighting for the same spot. ULIPs work for people who want insurance and investment handled together in one place. ETFs work for people who want clean, low-cost, flexible investing and nothing else.
For most people who think about it clearly, the better move is a term insurance plan for life cover and an ETF for wealth creation. Keeping the two separate usually gives you better outcomes on both fronts.
FAQs
-
Can I hold both ULIP and ETF in my portfolio?
Absolutely. They serve different purposes, so having both is not unusual at all. -
Are ULIP returns guaranteed?
No. Since returns are market-linked, they go up and down with fund performance. -
Why do ETFs generally give better returns than ULIPs?
Lower charges. Both track the market, but ETFs do not deduct mortality fees, admin costs, or hefty fund management charges, so more of your money stays invested. -
Do I need a demat account to invest in ETFs?
Yes. ETFs trade on stock exchanges, so a demat and trading account is required. -
What happens if I stop paying ULIP premiums before 5 years?
The policy could lapse or move to a paid-up status, and discontinuation charges usually apply; it can hurt your overall returns. -
Is ETF a good fit for short-term goals?
Yes, since there is no lock-in, you can invest and exit based on your own timeline.
Insurers Offering ULIPs
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or
insurance product offered by an insurer.
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˜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.