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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?

  • 2,188 Views | Updated on: May 10, 2024

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

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  • Since the invested capital cannot be withdrawn or relinquished during the first five years, it does not provide liquidity.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

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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