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ULIP vs Term Insurance

By Finserv MARKETS - Mar 12,2019
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ULIP vs Term Insurance - Key Differences Between ULIP & Term Insurance

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 (ULIPs) and Term Insurance.

Let us discuss ULIP and Term Insurance in detail so that you have a better understanding of the two, which will further help you choose the one that best suits your financial needs.

What Is Term Insurance?

A term insurance plan provides life insurance coverage for a specified period. You get the liberty to choose the policy tenure, and it could be anything between five years and your entire life. This is the most basic type of life insurance plan, and thus the premiums are quite affordable.

Just remember that if you stop paying the premiums, the policy is terminated. Also, no payout is given at the end of the policy term in case you outlive the policy. In simple terms, the policy covers you for only one thing – death.

What Is ULIP?

Knowing ‘what is ULIP’ is essential as unlike other insurance vehicles, this plan also allows your money to grow through market-linked investments. In Unit Linked Insurance Plans or ULIPs, a part of the premium is utilised for insurance coverage while the remaining amount is invested in funds of your choice.

At the time of maturity, you will receive the sum assured and/or the fund value of the unit-linked investments (whichever is higher in value).

Difference Between ULIP and Term Insurance

Consider the table below for a better understanding of ULIP and Term Insurance based on different parameters:-

Unit Linked Insurance Plans (ULIPs) Term Insurance
Type of Policy ULIP offers the benefits of insurance as well as investment. Term Insurance, as the name suggests, is solely an insurance plan.
Ideal For It is ideal for those people who are planning to build their wealth through long-term investments. It is ideal for the financial functioning of the family in the absence of the sole earner.
Investment A part of the premium amount is invested in funds of your choice. It can be either equity-oriented funds, debt funds, or a combination of the two. No investments made here.
Insurance The remaining portion of the premium amount goes towards life insurance coverage Purely an insurance product.
Returns Here, returns are dependent on the market performance of the funds. No returns.
Ideal Time To Invest You can start investing in ULIPs at an early age. Since ULIP is a long-term investment, it allows your money to grow. This thus benefits you in the end. Term insurance is taken to financially protect your loved ones in your absence.
Applicable Charges Charges such as fund management charges, administration charges, fund allocation charges, and more are applicable. No charges are applicable.
Ideal Time To Purchase You can buy ULIPs at any time based on the financial objectives you plan to accomplish. Anytime between the age of 25 years and 35 years.
Lock-In Period Five years No lock-in period, but you have to renew the plan every year.
Tax Benefits You can avail tax deductions under Section 80C for the amount paid as premiums.

Also, the maturity amount is tax-free under Section 10(10D).

You can avail tax deductions under Section 80C for the premiums paid.

Also, the claim benefits paid to the nominee are tax-free under Section 10(10D).


Both term life insurance and unit-linked insurance plans are meant to serve two different purposes, with the latter being an investment-cum-insurance plan, while the former is a pure protection plan.

Typically, it would help if you went 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.

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