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Difference between ULIPs and Traditional Plans

By Finserv MARKETS - Feb 25,2019
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ULIP vs Traditional plans

Different people invest in products like insurance for different reasons. Depending on your personal goals, you may invest to earn good returns, secure your future, or create wealth to help you fulfil your financial needs and requirements. Broadly, irrespective of your goals, there are two types of insurance plans that you can use: Unit-Linked Insurance Plans or Traditional Plans. Both come with their own benefits, hence, it can be difficult to decide which option is best suited for your financial goals.

Here, we’ll take a closer look at both these investment options to help you better understand and make an informed decision.

What is a ULIP?

A Unit-Linked Insurance Plan is a market-linked product. ULIP benefits include the dual benefit of a life insurance cover as well as an investment. A portion of the premium is used to provide life cover, while the rest of the money is invested in a mix of equity and debt instruments based on your risk appetite and life stage goals. At the end of the policy term, the investor is provided with the returns on the investment.

What is a Traditional Plan?

Traditional plans include term plans, endowment plans and life insurance policies. Traditional policies are considered risk-free, as they provide fixed returns in case of death or maturity of the term.

Which is Better?

Let’s see whether endowment plans or ULIP plans are an ideal option for you.

1. Investment Options

With a unit linked insurance plan, you have complete control over where your money is being invested. You can choose to invest 100% of your money in equity, debt or balanced funds.

On the other hand, traditional plans don’t allow you to choose investment avenues.


When you have a unit linked insurance plan, you are completely aware of how much money is being invested and what kind of market instruments it is being invested in. Additionally, you will receive regular updates about how your investment is doing.

In traditional plans you are informed about what you will receive on maturity.


ULIPs plans are flexible in the sense that there are multiple withdrawal options as per the convenience of the plan owner. This allows for greater financial flexibility during times of need. The same option is not available for traditional plans.

4. Charges

There are certain charges associated with ULIPs. However, these are always mentioned right at the onset. You can choose to go with investment plans available on Finserv MARKETS that have no premium allocation charges attached.
Sadly, with traditional plans, there is no clarity on the charges.

Now that you have all the information regarding the two types of investments, you can make an informed decision based on your personal financial goals. As with any investment opportunity, make sure you do a little research before you decide on the best ULIP plans or endowment plans to fulfil your needs and requirements.

To know more on ULIP investments in depth, you can check out these blogs:

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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522