ULIP vs SIP: Why ULIPs are Often the Better Choice

Planning your finances can be tough, but with the dynamic choices of smart investments available in the market today, you can develop a smart investment strategy.


You should choose among the different avenues of investments by considering the present inflation rate. Among the different options that you can consider, ULIP plans and SIPs present compelling cases for investors.

Which one should you choose? Here is a look at the same in this article. 

ULIPs- Knowing More About Them 

What is a ULIP plan? A ULIP is the abbreviation of a “Unit Linked Insurance Plan”. It is a specialized financial offering which combines both insurance and investments. You get life insurance coverage throughout the policy tenure while your money is invested into market-linked instruments, including various kinds of funds.

Market conditions and overall fund performance in the same determine the returns. It is thus a good future investment tool. Since they combine insurance and investments, ULIPs are regarded as radically different from other kinds of investment plans or insurance policies.

By purchasing a ULIP, you will not only scale up your life insurance coverage, but also your ability to diversify your investments through numerous types of funds like equity, debt, or a mixture of both. 

In essence, it fulfils your general insurance requirements while allowing you to profit from the market. ULIPs are an ideal tool for promoting both long-term asset-building and financial discipline. You can use investments to meet long-term goals as well. 

SIPs- A Brief Look 

A SIP is an abbreviation of “Systematic Investment Plan”. The SIP is a predetermined amount which is regularly deposited into your mutual funds. You can start a SIP on either a monthly, quarterly, or yearly basis.

A SIP lets you start with just Rs. 500 and progressively amass a sizeable sum. SIPs are best suited for beginners. SIPs enable the achievement of short-term and long-term financial goals, depending on the funds chosen and the investor’s risk appetite. 

Continue reading to learn more about the distinction between ULIPs and SIPs.

Should You Choose ULIPs Over SIPs?

Now that we know more about ULIP plans and SIPs, we must learn about the opportunities offered by both of these plans.

The following pointers will help you choose between the twain: 

➤ Death Benefit:

A ULIP is the only option that offers this benefit. Since ULIPs are products of insurance agencies, on the unfortunate occasion that the policyholder dies before the policy’s expiration date, the beneficiaries will get a death benefit or sum assured for safeguarding their financial future. On the other hand, for a SIP, investors do not receive a death benefit. This is because the SIP is merely a method of investing.

➤ Extensive Options:

SIP and ULIP plans differ in this regard as well. Due to the flexibility of changing investments at any time, ULIP customers have more options. Participants in ULIPs can fund-switch based on their changing life goals and stages, along with market movements. On the other hand, SIPs may prohibit shifting investments or funds in the policy tenure. 

➤ Management Fees

ULIPs are liable for an investment management fee of 1.35% in accordance with IRDA regulations. Mortality, servicing and rate management are additional costs related to the ULIP. SIPs, on the other hand, are subject to a wealth management fee of 2.25%.

➤ Risks

Even though both investing options have market-related gains, they also carry considerable risks. Using ULIPs or SIPs is the best way to generate long-term financial rewards in terms of asset appreciation. In contrast to most SIP plans’ lock-in period of three years, the ULIP plan will have a lock-in period of five years.

➤ Profits

The returns in each investment option depend on how well the fund performs. How a ULIP performs will depend on whether an investor invests in the right funds at the right time.

Yet, SIP makes this characteristic blatantly visible. ULIPs are considered to be a significantly more profitable investment option for those looking for a safer alternative to direct stock investments and with medium to low-risk tolerance. ULIP fund managers typically invest in low-risk fund options to assure the security of the invested capital. 


The ULIP seems to be a smarter investment option than a SIP because of its benefits. However, one must choose according to their investment strategy, considering potential factors like the present inflation rate.

SIPs enable you to routinely invest in ELSS (Equity-Linked Savings Schemes) or mutual funds, enabling you to steadily develop your wealth over time. ULIPs provide an extra benefit in this regard.

You can benefit from investments while also receiving life insurance coverage. You also get tax deductions up to Rs. 1.5 lakh on your premium payments for ULIPs under Section. For SIPs, only ELSS investments give you this benefit. Other types of mutual funds may not come with the same.

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