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Which Is Better: ULIP or SIP?

After examining the features of ULIP & SIP, you can choose which investment option provides you with the most benefit. Read to know more about which is better - ULIP or SIP?

  • Mar 02, 2022

Without one another, financial planning and investment possibilities are pointless. As a consequence, it’s critical to select the finest investment option that suits your short and long-term financial objectives, budget, and return expectations.

In this article, we’ll look at the long-running dispute about which is the better option: ULIP vs SIP. Read along to get all of the facts regarding the two choices so you can make the best decision possible for yourself and your family.

Unit Linked Insurance Plan (ULIP)

ULIPs are distinctive in that they integrate the benefits of investment and coverage into a single policy. When you buy ULIP, you get protection as well as the flexibility to diversify your funds or assets between stocks and bonds. In essence, it is a great way to earn market-linked profits while simultaneously providing insurance protection.

Features of ULIP

  • Features of ULIP

ULIP plan have a five-year lock-in period and among the greatest options for developing steady investment habits. The lock-in period is usually specified by the policy’s grant date. In addition, following the 5-year lock-in term, the policyholder has the option of cancelling the insurance and withdrawing assets as needed.

  • Funds

ULIP funds in a single plan provides a variety of investment funds such as stock, debt, and others.

  • Liquidity

Since the invested capital cannot be withdrawn or relinquished during the first five years, it does not provide liquidity.

  • Flexibility

Top-up, swapping, and premium redirection are some of the investing options available.

  • Charges

It includes a number of fees, including premium distribution, fund management, maintenance, etc. However, not every insurer demands these charges.

  • Tax Benefits

Section 80C of the Income Tax Act,1961 allows for tax deductions of up to ₹1.5 lakh. Section 10 (10D) exempts death and maturity benefits from taxation.

Systematic Investment Plan (SIP)

SIP is a method of contributing in a mutual fund. It allows investors to put a certain amount of money into a mutual fund of their choosing on a regular basis. These payments might start as little as ₹500. In addition, payment schedule can be weekly, monthly, quarterly, or annual, giving you a lot of flexibility.

Features of SIP

  • Lock-In Period

Mutual Funds and ELSS have a 3 year-long lock-in term, whilst other open-ended plans have no lock-in time.

  • Funds

For diverse investment funds, different mutual fund strategies must be chosen. As a result, one SIP is required for each type of plan.

  • Liquidity

Ensures proper liquidity because the invested capital may be cashed whenever the investor wants.

  • Flexibility

Long-term profits can be generated by increasing and decreasing invested money.

  • Charges

Only in a few circumstances are there entrance and exit load costs.

  • Tax Benefits

Not all investments are eligible for tax advantages. Nevertheless, under Section 80C of the Income Tax Act, 1961, an asset in ELSS funds is eligible for a tax refund of up to ₹1.5 lakhs.

To summarize, everyone requires money to achieve their immediate and long-term financial objectives. After examining the features of ULIP and SIP in detail, you can choose which investment option provides you with the most benefit. Therefore, you must conduct a thorough research if you are choosing between a best ULIP investments and SIP to make a decision and take your first step towards financial planning.

In this policy, the investment risk in the investment portfolio is borne by the policyholder.

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Ref. No. KLI/22-23/E-BB/521


- A Consumer Education Initiative series by Kotak Life

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