There has been an ongoing war between ULIP (Unit Linked Insurance Plan) and mutual funds with each trying to trump the other. Amidst all the advantages and the disadvantages, which one is better? In a market where each agent is trying to promote his own, which product is a sounder choice? A mere glance at the surface will not answer your question. Specific factors need to be considered and evaluated before one product is announced as the victor.
A ULIP is a type of life insurance product that provides you with the dual benefit of insurance along with investment. The premium that you pay is split two ways: one part goes towards providing you with insurance and the second part is invested in a variety of equity and debt schemes.
On the other hand, we have mutual funds which are a type of investment product in which the money from several investors is pooled together and then invested in some qualified low-risk and high-risk investments like bonds, stocks, and other assets. The resulting profit is distributed among the investors depending on their portfolio.
The most significant advantage that ULIPs have over mutual funds is that they offer the investor with insurance along with investment. This makes ULIPs highly attractive among people who are looking to invest their hard-earned money. The ULIP benefit of providing insurance along with investment has been one of the primary reasons for its rising popularity in the market.
ULIPs give you the freedom to choose where you want to invest your money. Depending on your risk appetite, you can choose from many options. Moreover, ULIPs are flexible; you can switch between funds if you think that your current fund is not giving you sufficient returns. On the other hand, you do not have that kind of freedom with mutual funds. It is your fund manager who controls the allocation of the portfolio, and you don’t have a voice to say where your money should be invested. Moreover, the fund management charges for mutual funds are much higher than those for ULIPs.
Unlike ULIPs, mutual funds (except Equity Linked Saving Scheme) do not offer tax rebates. Under section 80(C) and 10(10D), you can avail tax deductions on ULIPs.
Edelweiss Tokio’s Wealth Plus is one of the best ULIP in the market today. Offering zero allocation and administration charges, additional allocations are added to the fund on every premium paid by you during the premium paying term, Option for Rising Star Benefit to ensure that your child’s future financial needs are taken care of even in your absence and tax benfits.
Summarizing, ULIPs are one of the cheapest insurance-cum-investment policies in the market today, and some of them are cheaper than mutual funds. If you wish to keep a close eye on your investments and aim for substantial returns in the long term, ULIPs are ideal for you.