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Difference Between Guaranteed Savings Plan and ULIP

A guaranteed Savings Plan (GSP), is a non-participating non-linked endowment life insurance plan.  ULIP provides the dual benefit of investment and insurance.

  • 7,037 Views | Updated on: Jan 10, 2024

Financial planning and safety are critical for almost all of us because we need to be financially strong to handle the different situations for ourselves and our families in every phase of life, ensuring a secure future for our families and us.

However, it might be difficult for many to select the right financial product for themselves, given the limitless availability of financial plans. So, if you are planning to invest and looking for an insurance plan to fit your financial goals and requirements, you may look for Unit Linked Insurance Plans (ULIPs).

Thus, to make it clearer for you, we will discuss the difference between a guaranteed savings plan and ULIP. This will help you understand why ULIPs have become popular and why they may be a better investment option when comparing ULIP and guaranteed plans.

Difference between Guaranteed Savings Plan(GSP) and Unit Linked Insurance Plan(ULIP)

Here is a table based on the important parameters to suggest the difference between guaranteed savings plan and ULIP.

Difference between Guaranteed Savings Plan and ULIP

Parameters

ULIP

Guaranteed Savings Plan

Purpose

Dual benefit of investment and insurance

Mainly non-participating insurance and guaranteed returns

Objective

Investment and insurance with market-linked opportunities

Guaranteed Savings/returns

Tax benefit

Available under Section 80C & 10(10D)

Available under Section 80C

Return on investment

Variable return based on the type of fund invested in and markets’ performance

Guaranteed return as the investment in volatile and risky funds is low.

Charges

All the charges are transparent and the policyholder is informed beforehand about them

Managing GSP can be a little expensive. Can include some hidden charges based on the policy terms.

When should you consider

To be considered when you require life insurance protection and a good return to stay in sync with market growth.

If you manage ULIP wisely you can get a good long-term return.

To be opted by those who don’t want to take any risk and need guaranteed return at a stable rate of interest.

How your money is utilized

The premium paid is divided into two parts. One goes towards insurance and the other one towards investment in market funds.

The premium directly goes towards insurance cover. The policyholder is promised a guaranteed payout.

SIP

Yes

No

Investment portfolio

You can manage which funds you want to invest in and switch between them.

You cannot track the exact portfolio until the insurance company reveals its holdings

No method of knowing the investment portfolio. The whole fund is managed by the insurance company

Lock in period

3 – 5 years depending on policies

Locked till maturity. Can be discontinued after 3 years without losses and payment based on the premium deposited

Security

No security on investment as linked to market products

Highly secured & Guaranteed return

Ideal term

Suggested for long term

Preferred Long term


The information mentioned above is enough to tell you all about ULIP vs Guaranteed plan. From what we have seen, ULIPs seem to be a better deal for people who are aiming at long-term wealth generation. Both ULIPs and Guaranteed Plans are good investment tools. The requirement will differ in each.

If you are looking for a long-term investment and balanced or optimized returns, ULIP is tailor-made for you. However, if you know that future holds uncertainties and you need to invest for those unforeseen situations, guaranteed plans can be your savior.

- 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

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

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