Term Plan Vs ULIP - Compare & Choose

ULIP vs Term Insurance

Having sufficient savings and investments, along with adequate insurance, makes up for a sound financial plan. With the plethora of insurance instruments available in the market, choosing the right one can be a daunting task.

Every insurance product has its pros and cons, but the purpose they serve is the same. The objective behind buying insurance is to provide financial security to our loved ones and us. Since financial security is extended to different causes in life, we have different types of insurance plans in the market.

Here, we will be discussing the difference between ULIP and Term Insurance, as it can be confusing for many people. Let us understand which is better, Term Plan or ULIP.

What is Term Insurance?

A term insurance plan is the most basic type of life insurance product available in the market. Ideally, the policy offers death benefits to the beneficiaries of the plan in case the policyholder dies. It acts as financial protection for your family, in your absence.

Features of Term Insurance

The following are some key term insurance features –

• The policy offers death benefits to the beneficiaries upon your death.
• To make the product flexible, some insurers offer maturity benefits as well. However, you need to have the return of premium cover to avail this benefit. With this cover, the insurer will repay the premiums paid towards the policy if you survive the term.
• Term insurance is the most affordable life insurance product available in the market. You pay fixed premiums throughout the policy tenure.
• The premiums paid towards the plan can be claimed for tax deductions under Section 80C of the Income Tax Act. Also, the death and maturity benefits received are tax-free.

What is ULIP?

The Unit Linked Insurance Plans (ULIPs) are primarily an insurance product. But the policy also allows you to make investments in funds of your choice. Hence, ULIPs are known to offer dual benefits – life insurance protection as well as investment. A part of the premiums paid are utilised for life insurance coverage, and the remaining portion is invested in market-linked funds.

Features of ULIPs

The following are the key features offered by ULIP investments –

• The policy offers dual benefits - wherein you can enjoy life insurance coverage and wealth creation all under a single plan.
•  You (the policyholder) have the liberty to choose whether you want to invest in debt funds, equity-oriented funds, or a combination of both. This decision depends on your risk appetite.
•  ULIPs allow the flexibility of switching funds for a better market return. So, if you feel that your investments are not performing well in the stock market, you can switch (from debt to equity and vice versa) depending on your risk appetite and market performance.
• ULIPs don’t have high charges associated with them. As per the Insurance Regulatory and Development Authority of India (IRDAI), it has annual charges between 2-2.25%.
•  It is wise to invest in long-term ULIPs so as to yield reasonably high market returns.

Difference between ULIP and Term Plan

The following table will help you understand the difference between term plan and ULIP. ULIP or Term plan, which is better for you? Find out here:

The Conclusion

By now, we believe that you have a fair idea of the difference between Term Plan vs ULIP. With this, also ensure that you are taking your current financial situation, expenses, other investments, and future financial objectives into consideration. This will help you make an informed decision when buying either of these plans.

You can then browse Term Insurance Plans and ULIP investment options available on Bajaj Markets, and choose a plan that best suits your needs.