December 4, 2023


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Where To Invest – ULIPs Or Mutual Funds?

ULIP returns calculator

ULIP returns calculator

ULIP returns calculator: What do you do when you want to grow your wealth while prioritising your financial future as well as that of your dependents? The first option you will come across is that of investment. While there are many options available at your disposal, you can consider the following two for starters: ULIPs and mutual funds.

They provide you with the opportunity to invest grow your wealth with time. But what are differences between the two? And which one provides more benefits? Would ULIP returns in 10 years be more compared to that of mutual funds? Keep reading to get a better understanding.

What is ULIP?

A ULIP is a type of life insurance policy which provides you with the dual benefits of insurance and investment. Investment allows you to grow your wealth for a financially secure future for you and your loved ones. Insurance allows you to financially protect your loved ones from the risks in life. The premium finances both the components under this plan.

What is a Mutual Fund?

A mutual fund is where your is invested in equity markets and get returns on the investments. Mutual fund investments are both short-term and long-term. As your money is primarily invested in stocks of market-listed companies, your investments may be exposed to a higher-risk factor. This means your returns get fluctuated due to market risks.

Where should you invest?

Listed below are the differences between these two products to help you understand:

  1. Purpose of investment

You get to invest in funds as well as a life insurance cover in a ULIP, meaning you get dual benefits in the same plan. You can grow your wealth by investing in equity as well as debt funds. These investments tend to show growth when you stay invested for a longer duration. With the insurance cover, your family gets death benefit if something unfortunate were to happen to you. This can help your family remain financially stable.

On the other hand, mutual funds are only for investments. Your money is invested in market-linked options, which provide returns on maturity. However, insurance cover is absent for life risks. This means you may have to in a separate life insurance policy for the safety of your loved ones.

  1. Transparency offered

Among the many benefits that you get in a ULIP, transparency is one of the important ones. The investments you make and the returns you get can all be tracked in ULIPs. This can benefit you if you want to consider switching your investments. In ULIPs, you get to invest in either equity funds or debt funds. While equity is a high-risk, high-return type of fund, debt is a low-risk, low to medium return type of fund. If you have invested in both, reallocation from one fund to another can be done. This helps in balancing your investments, maintain your returns, and reducing the risk factor. 

This transparency is seldom offered in a mutual fund. Investments done in mutual funds are mostly limited to equity funds. The option of fund switch is absent in mutual funds. And you cannot track the stocks in which your money is invested or what the returns are.

  1. Tax benefits offered

In ULIPs, tax benefits are provided on both premium payments and maturity benefits of the policy. Policies purchased during the old tax regime, premium payments of up to Rs. 1.5 lakhs are eligible for tax deduction under Section 80C of the Income Tax Act. The maturity benefit that you receive are tax exempted under Section 10(10D) of the Income Tax Act. Under certain conditions of Section 10(10D), partial withdrawals done from ULIPs are also eligible for tax deductions. Under the new tax regime, policies purchased on and before 1st March 2021 have tax deduction on premium payment of up to Rs. 2.5 Lakhs. 

In mutual funds, tax exemption is given only on premium payment. The premium limit is the same as that of a ULIP. The maturity benefits are taxed. About 10% tax is levied on the pay-out that you receive from your mutual fund investment.


As you can see, different factors give ULIPs an edge over mutual funds. If you wish to invest in a ULIP, you can use the ULIP returns calculator to get an idea about your returns based on your investment. 

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