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How ULIPs are different from Mutual Funds

By Finserv MARKETS - Jan 28,2019
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How ULIPs is different from Mutual Funds

Benjamin Franklin once said, “An investment in knowledge pays the best interest” and even after so many years, this statement still holds true. While investments can prove to be the door to a secured future, knowledge can be the key. With a few smart choices, you can also boost your income to reap fabulous returns. Today, the market has a lot of options when it comes to savings, namely, fixed deposits, PPF, shares, mutual funds and of course, Unit Linked Insurance Plans. All you need is the right information about which option to invest in.

Hence, in this article, we will help you understand the differences between the two often confusing forms of investment: ULIPs and Mutual Funds.

Today, Mutual funds and ULIPs are the two most popular choices for investment in the market. Both plans are subject to market risks but yield better results if invested in smartly and properly. Let us see how the two major plans differ from each other.


ULIPs: A ULIP is a market – linked product that provides the dual benefits of an investment as well as a life insurance cover. These plans essentially invest your premium (post deducting certain charges for services rendered) into various equity, debt or hybrid market instruments. Also, under ULIP plans, life cover offered is not just 10x your premium amount, it can also be more. Your ULIP premium as well as return on investment are tax exempted under the Income Tax Act, 1961.

Mutual Funds: Mutual Funds are an investment avenue that help investors invest their money into leading market instruments. However, there is no insurance cover or tax benefits (with the exception of ELSS) provided with Mutual funds

ULIPs vs Mutual funds

Type of Plan: ULIP has the additional factor of being an insurance plan, while mutual funds are purely investment based.

Tax benefits: All ULIPs having life cover of 10x and above are eligible for tax benefit under Section 80C of the Income Tax Act, 1961. Whereas, in mutual funds, only Equity Linked Saving Scheme (ELSS) investors, or those who invest in specifically tax saving mutual funds are qualified for tax benefits.

Amount to be invested: ULIPs allow the investor to choose his investment amount based on his paying capacity. An added advantage is that the premium paying frequency is flexible in ULIPs. An investor has the option to change his payment frequency if he wants.

Life cover: One of the major benefits of ULIP is it offers life cover, which is not the case with mutual funds. Usually, ULIPs offer a 10x or more life insurance risk cover on the premium.

Risk exposure and returns: Both mutual funds and ULIPs come with a certain amount of risk associated with them due to market volatility. Both ULIPs and mutual funds have the same risk exposure as both are market-linked investment instruments. However, you can maximise your ulip returns by employing certain smart investment strategies.

Charges: ULIPs are IRDA (The Insurance Regulatory and Development Authority of India) regulated. Mutual funds, on the other hand, are regulated by SEBI (Securities and Exchange Board of India). Both ULIPs and mutual funds levy management charges. In addition to this, ULIPs also deduct three other charges, which are called – premium allocation charges, policy admin charges and mortality charges. However, these charges are very small as compared to the amount being invested.

The trend is such that young investors are moving away from traditional investment schemes and looking for ways to invest their money in more dynamic and fast return policies. This is where ULIPs and mutual funds come into play.

Finserv MARKETS today is one of the leading providers of ULIPs and is highly rated in the market. As per Morning Star, ULIPs from Finserv MARKETS have provided returns of as high as 25% for a 5-year investment period! Click here for more information.

So, now that you have a better understanding of ULIPs vs Mutual Funds, invest in one which helps your money work for you.

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

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522