ULIP vs SIP

Every individual has a short-term or long-term financial goal that they plan to achieve as soon as possible. Some of the short-term goals include home renovations, planning an international trip, and so on; whereas long-term goals include pursuing higher education abroad, planning your dream wedding, and a healthy retirement plan.  

But how do you plan on achieving these financial goals?

Well, don’t worry! Unit Linked Insurance Plans and Systematic Investment Plans (SIPs) are two such financial instruments that will help you fulfil your financial needs.

In this article, we will be discussing ULIPs vs SIP in detail. Let us begin by understanding what Unit Linked Insurance Plans are.

 

What Is ULIP?

Unit Linked Insurance Plan provides you with the benefits of both – insurance as well as investment. The primary objective of ULIP Plans is to help you build your wealth and provide you with life coverage.

A portion of your investment is utilised for life insurance; whereas the remaining part is used for investments of your choice. For investments, you can either choose between equity, debt, or a combination of both – depending on your risk appetite.

 

What Is SIP?

Systematic Investment Plan (SIP) allows you to invest a fixed amount in a mutual fund scheme of your choice. Here, a fixed sum of money is deducted from your bank account every month and is directed towards the mutual fund scheme you have chosen to invest.

 

Features of ULIPs

Here’s a list of some salient ULIP features –

  • Life Cover: Above all, it is the only investment plan that also provides life insurance benefits. It offers your family with financial security in case of your sudden demise.

  • Income Tax Benefits: A lot of people are unaware of the fact that ULIP charges are eligible for tax deductions under Section 80C. Moreover, the ULIP returns that you gain after the policy matures are exempted from income tax under Section 10(10D) of the Income Tax Act.

  • Financial Long-Term Goals: It is a good investment option for people planning to achieve long-term financial goals like buying a new house, planning a dream wedding, buying a new car, etc. Investing in long-term ULIPs will allow you to gain high returns. Hence, most plans come with a 5-year lock-in period.

  • Flexibility: As we mentioned earlier, you have the liberty to choose the type of funds you want to invest in. Depending on your risk appetite, you can either choose to invest in equity-oriented funds, debt, or a combination of both. Moreover, depending on the market movements, you can switch between equity and debt, and vice versa.

     

Advantages of ULIPs

Some major ULIP benefits are mentioned below –

  • Triple Benefits: We all know that a unit linked insurance plan is an investment instrument that also provides life coverage benefits. A portion of your premium is paid towards life insurance, and the remaining part is invested in funds of your choice. Thus you get triple advantages of life coverage, wealth creation, along with ULIP tax benefits.

  • Allows You to Choose a Preferred Asset Class: With unit linked insurance plans, you can choose your preferred asset class depending on your risk appetite. If you are ready to take risks, you can choose to invest in equity-oriented funds. But if you have a low-risk appetite, investing in debt funds is a better option.

  • Partial Withdrawals: You can make a partial withdrawal with ULIPs after the mandatory five-year lock-in period is over. Withdraw money as and when needed to achieve your goals. However, its noteworthy that you do not make a withdrawal which ultimately leads to policy termination.

     

Advantages of SIPs

Some of the SIP benefits are explained below –

  • Disciplined Savings: SIP inculcates the habit of savings in an individual, which is essential for long-term wealth creation. Since it has an auto-debit facility, a specific amount is deducted from your account every month and invested in mutual fund schemes of your choice.

  • Start Small: You can make a SIP investment of as small as INR 500. However, over some time and as your income increases, you can increase the said amount accordingly. Also, long-term SIP benefit from the power of compounding. For instance, assume you gain returns of 12%. So with a monthly investment of INR 1000 for ten years, you can earn over INR 2.30 lakhs.

  • Protection against Market Volatility: Since your investments are spread over a long period, you will be protected against market volatility. It protects your investments during the market lows as a dip in the corpus can affect your financial goals.

     

ULIP Calculator

The ULIP calculator is nothing but an online tool that allows you to gain an understanding of the maturity amount based on your expected future investment value and returns. Moreover, it also allows you to compare multiple plans based on the profits.

 

A Final Thought

Everyone has short-term and long-term financial goals to achieve. Choosing the right investment instrument that will help you achieve the said goals is essential. With ULIP plans, you can benefit from both – an insurance coverage as well as investments.

If you are looking for investments, log on to Finserv MARKETS. The unit linked insurance plans at Finserv MARKETS not only provide dual benefits (benefits of insurance and investment under a single policy), but also allow you to grow your wealth over the long run, has tax benefits, and protects you and your family.

So, why wait! Browse ULIP plans online at Finserv MARKETS, right away.

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