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ULIPs and Term Plans serve different needs: Understanding key differences

By Finserv MARKETS - Mar 12,2019
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ULIP and Term Plan key differences.

Insurance is a way of mitigating risks. While the value of life can never be measured in monetary terms, getting life insurance offers financial stability in times of uncertainties as well as wealth creation towards your dreams. With so many insurance companies offering different types of products, it is necessary to understand which plan you need to buy. Two of those product options are Unit Linked Insurance Plans and Term Insurance.

In simple terms, a term life insurance policy is a plan that covers your family’s financial security in your absence. Unit linked insurance plans also safeguard your family, while helping grow your money by investing in equity or debt MARKETS. ULIPs fulfil the need of investors looking to gain extra returns for their life goals such as retirement and other personal financial goals.

Who should buy a term insurance plan?

If you are looking to secure the future of your loved ones at a lower cost, then a term insurance plan is best suited for you. It also gives you the added benefit of claiming tax deductions under Section 80C of the Income Tax Act, 1961.

Who should buy ULIPs?

ULIPs are beneficial if you are looking for additional long-term gains from life insurance. They provide a much-needed portfolio diversification with just one investment. Like term insurance, with Unit linked insurance plans too, you can get a tax deduction up to Rs. 1.5 Lakh under Section 80C and tax exemption on ULIP returns under Section 10(10D) of the Income Tax Act.

Additionally, through unit linked insurance plans, you can reap the benefits of the long term gains in equities without having to pay any capital gain tax.

Why term insurance?

Term life insurance provides your family with the assurance of a high coverage against the biggest possible risk, i.e. death. It is also considered to be the cheapest form of life insurance with no frills attached. Once you buy a term insurance plan, you freeze the premium for the rest of the policy tenure.

So, the earlier you buy a term plan, the more profitable it proves to be in the long run.

Why ULIPs?

ULIPs give you the flexibility to invest your money as per your risk profile, convenience and financial commitments. You get the option of selecting from some the top-rated funds in the market, at Finserv MARKETS. You can transfer or switch the accumulated amount among any of the 6 to 8 funds available, with no tax implications.

Along with long term benefits, ULIP plans also provide the flexibility of tenure, despite a five-year lock-in period, as you can cash in on the investment any time after five years without any cost.

Both, term life insurance and unit linked insurance plans are meant to serve two different purposes, with the former being an investment-cum-insurance plan, while the latter a pure protection plan.
Normally, you should go for investment plans that build a corpus for your future requirement and ULIPs at Finserv MARKETS are one such product.  However, the financial stability of your family remains paramount, which can be achieved with a prudent mix of term and unit-linked insurance plans.

“Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we works towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.”


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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