19 MAY 2016
Difference between ULIP and Mutual Fund
A ULIP or Unit Linked Insurance Plan is an insurance plan which carries an added advantage of giving you market-linked returns. The premium paid on a ULIP is divided into two portions; one that is allocated towards risk cover and the other that is invested in various types of funds like debt,equity,money market, financial instruments etc.This part of the ULIP is similar to a mutual fund with there being difference in the charges levied and the tax rebates. Like a mutual fund, where fund managers invest your money in different sectors, even in ULIP's, there are fund managers who invest your money in different sectors and instruments.
A lot of people get turned off when faced with the prospect of investing in ULIP's as they feel that Mutual Funds give them better retuns in the short and medium term.While this can be true, it is also true that ULIP's can hold their own in the long-run over mutual funds.
1) Firstly, ULIP's give insurance cover which means that in the event of death of the Life Assured, the nominees are entitled to fund value of the Sum Assured, whichever is higher. This ensures peace of mind for the individual as he knows that his family is covered and secure.
2) Secondly, switching between funds is permitted in a ULIP which can be a decent advantage in falling markets. With this facility, you can maximise your fund allocation even when markets are not doing good.
3) Third, investing in Insurance products offer you tax rebates under section 80C which is not available widely in mutual funds.
4) Fourth, because of the charges associated with early withdrawals in a ULIP, an individual is incentivised to stay invested for the long term which is bound to give better returns as compared to the short term gambles that he may otherwise take in the stock market.
5) Lastly, the returns that you receive from a ULIP is tax-free.
However, ULIP's are badly sold as pure tax-free investment policies. Agents wrongly sell it to their gullible clients in tax season by saying that they can withdraw the amount after remaining invested for 3 years. This is a misconception since in the first three years, the charges are maximum and yields minimum. In ULIP's ,the overall charge structure comes down significantly over the long-term ,allowing better and bigger allocation of premium to your chosen fund, thus assisting in wealth creation. Therefore, it's important that one stays invested in a ULIP for 10-15 years or even longer. The longer one stays invested in ULIP's ,the better would be the return on investment.
23 APR. 2018
Plan tax savings and enjoy higher returns with ULIPs
A Unit Linked Insurance Plan (ULIP) is the savvy combination of insurance and a financial plan which provides you with death or maturity benefit with the bonus of investing a portion of your premium in market-linked funds. Amongst the numerous investment productsread more
Understand your insurance needs in few minutes
Drop in your details & a dedicated product expert will call you back!
Thank you for your details.We’ll get in touch with you at the earliest.