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How Is ULIP Different from Other Life Insurance Plans? Where Can I Invest - ELSS, ULIP, or PPF?

How Is ULIP Different from Other Life Insurance Plans? Where Can I Invest - ELSS, ULIP, or PPF?
  • 16th Mar 2022 |
  • 254

The past, present, and future are the inevitable reality and truth of our existence. While the past cannot be altered, the present and future can always be protected. This is where the need for careful financial planning and investing choices becomes critical. Since the investment market has grown in size in recent years, it might be difficult for an investor to decide which financial instrument to invest in.

A great number of individuals favour ULIPs. If you’re interested in learning more about ULIPs and other investing alternatives, we’ll guide you through them in this article. Often, ULIPs are compared with ELSS and PPF, and individuals are generally quite confused as to which choice is best suited to their needs. We’ll continue to debate which is better: ULIP, ELSS, or PPF, and how ULIPS are different from other insurance plans. 

Differentiating Aspect of ULIPs from Other Life Insurance Plans

A ULIP or Unit Linked Insurance Plan is a scheme that combines insurance and investment into one package. It combines wealth creation with life insurance by having the insurance company invest a portion of your income in life insurance premiums and the balance in stocks, bonds, equities, or debt, or a combination of these alternatives, depending on your long-term objectives.

ULIP vs ELSS vs PPF

To help you make the best investment decision based on your financial goals, we’ve outlined the difference between ULIP, and ELSS, PPF.

Unit Linked Insurance Plan Or ULIP

Public Provident Fund or PPF

Equity Linked Saving Scheme Or ELSS

Investment Type

ULIP is a combination of investment and life insurance plans into one.

PPFs are a pure investment plan.

ELSS is a pure investment plan.

Lock-In Period

ULIPs have a 5-year mandatory lock-in period.

PPF have a mandatory lock-in period of 15 years.

ELSS have a minimum of 3-year lock-in tenure.

Objective

This financial plan provides momentum for investment gains as well as tax reduction and life insurance.

The scheme’s principal goal is to assist people in making little deposits and offer returns on their investments.

A professionally run fund that invests in a variety of equities and reaps the rewards.

Returns

In ULIPs, the rate of return might fluctuate.

Since this investor selects a mix of equity, bond, and hybrid funds for investment, this influences the rate of return.

PPF currently has a 7.9% annual rate of return.

The rate of return in an ELSS is subjected to variation, which means that it is solely determined by how well the stock market does over a period.

Risks

Significant risk, no assurance of money or return, but life insurance is assured.

PPF is a government-backed scheme and thus are risk-free.

Returns are dependent on the success of the wider markets and the fund manager - thus, they have high risk.

Tax Benefits

Returns and investments are exempted from taxes under 80C Deduction and Section 10(10D) of the Income Tax Act of 1961

Tax benefits are offered under Section 80C of the Income Tax Act of 1961.

Long Term Capital Gains (LTCG) tax regulation exempts investments as non-taxable under Section 80C and returns up to ₹1 lakh per year.

Which one is better - ULIP vs PPF?

After looking over all of the facts and studying the difference between ULIP, ELSS, and PPF, it’s critical to determine your financial objectives and then choose between ULIP, ELSS, and PPF to invest your money in the instrument that best suits you and your family.

Kotak e-Term Plan

Features

  • Nominal Cost
  • Multiple Plan Options
  • Flexible Payout Options
  • Critical Illness Rider
  • Tax Savings
  • Long term Coverage

Ref. No. KLI/22-23/E-BB/492

T&C

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