compare term insurance with ULIP plans

Term Insurance vs ULIP

These days, there are many insurance companies that are providing a variety of insurance products to choose from. However, sometimes, the abundance of variety confuse the insurance seekers about which option would suits their requirements  ULIPs (Unit Linked Insurance Plans) and term insurance are two such products.

To choose the better lot, it’s advisable to have knowledge of both of these products.

What is Term Life Insurance

The policy of a term life insurance is simple. It covers the customer’s family and provides his family with economic security, in case of untimely death of the customer. The coverage of the term life insurance spans till the end of the policy term which can be anywhere in between 20 years, 30 years to 45 years.

The annual premium should be paid by the consumer for the entire period of the policy. When the consumer stops paying the premium, the cover of his or her life insurance will end.

Keeping in mind all these aspects, it’s safer to say that term insurance is a complete & genuine plan to get death cover at the most affordable rate. The entire premium amount, which the consumers have paid pay for all the years, is engaged to provide death cover.

  • In case of unfortunate death of the policyholder during the policy tenure, a sum assured would be paid by the insurance company to the insurance nominee as the death cover.
  • The sum assured is decided by the policyholder at the time of buying the
  • The premium paid towards the policy of the term life insurance would fall under section 80C of the income tax if a consumer is looking forward to saving on taxes. In addition to that, receiving the sum assured would also be tax-free for the nominee.

What is Unit Linked Insurance Policy (ULIP)

ULIPs are the combination of investment and insurance plans. In ULIPs, a part of the premium is generally deducted as mortality charges. The remaining balance is deducted as premium & insurance, that are further invested in a variety of funds.

The funds where the money could be invested are debts, equities, market funds and bonds. So, by evaluating all these aspects, it can be concluded that ULIPs offer the consumers both insurance and investment option.

Investment flexibility:

ULIPs will give you the flexibility to invest consumer’s money according to his risk profile and financial commitments. The consumers have various options to invest. They can invest in debt, equity or in hybrid funds.

Fund Switching

The policyholders get the option to select the fund where he or she should prefer to invest their hard earned money. The insurance holder has access to transferring his money to any of the 8 fund options available with ULIPs.

Difference Between the ULIPs and Term Insurance Plans

Comparison pointTerm InsuranceULIP
Product typeInsuranceInvestment+insurance
Tax-savingsTax deduction under section 80©. The sum assured would be tax-free under the section of 10(10D) in case the death of the policyholder.Tax deduction under the section of 80©
InsuranceGenuine Life insuranceInsurance + Investment
InvestmentThere is no investment part.Half of the premium amount is invested in equity, debts, bonds and so on.
ReturnsSum assured paid on the death of the policyholder.The return is moderate and that depends on the performance of the market and allocated funds.
Time to consider buyingWhen the policyholder wants to provide financial security to his or her family and wants the higher return on his or her eternal absence.When the policyholder wants to give his or her family extra financial protection along with focussing on his or her investments.
ChargesThere is no charge except the premium payment.There are many charges such as policy administration fee, funds allocating charges, charges of the fund switching and so on.
TenureThe tenure is decided by the policyholder when to buy the policy for his or her family.It depends on the investor but the returns on the investment part will be received within 10 to 15 years of time frame.
Ideal termLong termLong term
Actual time to buyBetween the age of 25 to 35 years.It can be purchased anytime and it fully depends on the requirement of the policyholder.
Switching optionsThere is no switching option availableThe switching is allowed between the funds which are linked in the plan and change in the return of the risk.
Lock-in periodThere is no lock-in period. It needs to be renewed annually.Minimum 3 years to  5 years.
SecurityIt is highly secureNot secure
Maturity benefitsThere is no maturity benefit unless the policyholder chooses for the return of premium plan.The consumer can redeem units on the unit prices which is prevailed earlier.


There are various reasons to choose both the term life insurance and the ULIP. Both have certain kind of benefits. Below-enlisted a few reasons why you should choose term insurance or ULIP, respectively:

Why Buy Term Insurance Plan?

  • The term life insurance plan is the risk-free option as it offers death benefit to the surviving members of a family in case of death of the policyholder or the only earning member of the family.
  • In term life insurance, the component of the premium is low comparing to life
  • Lastly, the sum assured which is offered in the term insurance plan is quite higher compared to other life insurance plans.

Why Buy ULIP?

  • ULIPs allow the policyholders to enjoy the benefits of both the life cover and the investment opportunity. It provides the flexibility to secure the life with ease.
  • It provides the maturity benefit to the consumer.
  • If any of the policyholders is planning to invest for the long term, investing in ULIP is the best It fulfils the need and future demand of the customers. To get the most out of it, the policyholder needs to be invested for at least 10 years into a ULIP.