ELSS vs ULIP – Comparative Analysis

A common debate that arises when looking for market-linked investment options is whether to opt for ELSS or ULIP plans. While both promise attractive market returns, it becomes really difficult to decide which investment option will suit a person’s long-term financial goal. To help make your decision simple, this article gives a comparative analysis between the two investment tools.

 What is ELSS?

An Equity Linked Saving Scheme (ELSS) is a type of equity mutual fund, where a major portion of your mutual fund investment gets directed towards equity-related securities. As is the norm for all mutual fund investments, the ELSS equity funds are managed by professional fund managers.


What is a ULIP?

Unit Linked Insurance Plans (ULIPs) are unique insurance plans that not only offer life insurance coverage but also provide an opportunity to make market investments. This is achieved by investing a part of the insurance premium into market funds (debt, equity or balanced funds), while the remaining part gets invested in your life insurance.


ULIP vs ELSS: A Comparison

  • Regulatory Body

Since ULIPs are part-insurance options, they are regulated by the Insurance Regulatory and Development Authority (IRDA) of India. ELSS, on the other hand, are pure market investments. As a result, they fall under the regulation of the Securities and Exchange Board of India (SEBI).

  • Tax Benefits

When it comes to tax benefits, both ULIPs and ELSS fare equally. Investments in both these financial tools offer a waiver on tax for a maximum amount of Rs. 1,50,000 under Section 80C of the Income Tax Act.

  • Lock-in period

The lock-in period for a ULIP is generally up to 5 years. During this lock-in tenure, an investor can switch between market funds as per his/her risk appetite. For instance, if you want to reach a short-term financial goal, you can increase your risk potential and invest in equity funds while making your ULIP investment. However, at any point during the policy term, if you feel that you have reached your financial goal, you can easily switch back to safer debt or balanced fund investments for the remaining tenure.

Since ELSS is a pure equity investment, there is no question of switching between funds during your investment tenure. However, the lock-in period for ELSS is only 3 years. This gives a chance to enjoy the returns on your investment a lot sooner, as compared to other investment options.

  • Risk Proportion

ELSS returns are completely dependent on the prevailing market conditions. Depending on how well your fund manager has invested the money and the performance of your equity funds in the market, the returns will be calculated. Thus, the risk proportion in the case of an ELSS is slightly high.

Although ULIP returns are also subject to market fluctuations, they provide an added advantage of insurance cover. Additionally, the flexibility to switch between funds provides an advantage in case of any market turbulence. If at all you feel that the funds in which you are investing will not perform as per your expectations, you can switch your investment to other funds. Therefore, in comparison to ELSS, the risk proportion for ULIP schemes are less.

  • Loyalty Additions on Investment

Most insurance companies offer loyalty additions under their ULIP schemes. These include benefits of bonuses for continuing the investment or discount on premiums at the time of renewal of the insurance policy.

No add-on benefits are offered under an ELSS investment.


Difference Between ULIPs And ELSS

For the sake of brevity, here is a comparison for ULIP vs ELSS.




Scope of Investment

Insurance + Investment

Only Investment

Fund Options

Equity, Debt, Balanced Funds

Only equity-related funds




Tax Benefits

Exemptions up to Rs.1,50,000

Exemptions up to Rs.1,50,000

Risk Proportion

Slightly less


Lock-in Period

Up to 5 years

Up to 3 years



Not offered

Flexibility on Investment

Flexible switching between funds

No flexibility offered

From the above table, it is quite clear that the ULIP benefits outperform the ELSS features. If you are looking for investment options solely from a tax saving point of view, you can opt for either of the two investment tools. However, if you wish to reap long-term benefits along with getting an insurance coverage, ULIPs are your best option. Depending on your long-term financial needs, you can choose from a variety of customized ULIP plans. For instance, the Bajaj ULIP plans available on Finserv Markets are tailor-made to secure your child’s future; offer you financial support during your retirement, or solely widen your investment horizon over the next few years. To choose from the top-rated funds across industries for your ULIP investment, visits Finserv Markets now!

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