Insurance
Contents
Term Insurance vs ULIP
No Sign-Up. No Paywall.
FREE TO USENO LOGIN REQUIREDUPDATED FY 2025–26
Pure protection vs bundled insurance + investment. Why “buy term and invest the rest” usually wins on numbers.
Visual Comparison
Key Differences
| Feature | Term Insurance | ULIP |
|---|---|---|
| Cover | ₹1 crore for ₹10,000–12,000/year | ₹50 lakh for ₹1 lakh+/year |
| Investment component | None — pure protection | Yes — premium split between insurance + funds |
| Lock-in | None (can stop anytime) | 5 years |
| Transparency | Fully transparent | Charges complex: mortality, fund, policy admin |
| Returns (investment) | NA — not an investment | 6–10% (market-linked, after all charges) |
When to Choose Which
Choose Term Insurance
- Primary goal: income replacement for family
- Young, healthy, need maximum cover
- Want to invest separately in mutual funds
- Cost-conscious — term offers 100× more cover per rupee
Choose ULIP
- Only insurance product you will buy (not ideal)
- Tax saving on premium under 80C
- Employer-funded ULIP (no personal cost)
- You won’t invest the savings discipline otherwise
Frequently Asked Questions
For pure protection, term insurance is 5–10× cheaper and provides much higher cover. “Buy term and invest the rest” in mutual funds almost always gives better financial outcomes than ULIP.
Unit Linked Insurance Plan — a product that combines life insurance and market-linked investment. Premium is split between insurance charges and investment in funds.
ULIP maturity proceeds are tax-free under Section 10(10D) if annual premium is below ₹2.5 lakh. Above this, gains are taxable as LTCG at 10% after ₹1 lakh.
Due to multiple charges, the effective IRR on ULIPs is typically 6–8%, compared to 12–14% for equity mutual funds over the same period.
You can surrender after the 5-year lock-in. Surrender within 5 years: proceeds go to Discontinued Policy Fund at 4% — significant loss.