Ulips Vs. Life Insurance Plans - Which To Choose

Posted by amrina alshaikh on December 28th, 2019

ULIP is an insurance plan with an investment for returns. The money that you pay in ULIP will cover your life and give you the benefits back for your investment. You get this double bonanza in one plan. You have the facility to top-up your investment for increasing the benefits. In one stroke, you can protect and earn, and that’s the best part about ULIP. There are other leg-rooms also such as switching between plans and options to increase or decrease protection. There is another option of additional rider and to surrender. Traditional life insurance products give your life cover, return on investment and tax benefits also. These are older options for those who don’t have any appetite for risk.

The question remains the same- why should I invest in ULIP? You should invest in ULIP because there you have the advantage of having a good return on investment because your investment will be placed in the equity market. In traditional life insurance, your investment is not used in the stock market. In ULIP, the return is variable whereas, in life insurance, there is a fixed return. If you ask why should I invest in ULIP, the answer could be the ability of ULIP to invest the sum in the Equities that may turn out profitable in the long run. If you want to gain a sound return over the long term, you should invest in ULIP.

The money that you invest in ULIP is used to cover expenses to run the plan, insurance cover, and investment in the Equity market. In traditional life insurance, the money invested is used for covering expenses, risk cover and low-risk financial instruments like debt funds. If someone says why should I invest in ULIP, the answer would be to get higher returns on the premium paid and risk cover like an insurance product.

ULIP plans are flexible. You may decide which proportion of your premium should be used for risk cover and what for equity investment. In traditional life insurance, there is no flexibility. You will get a tax benefit in both these plans under section 80 C of the Income Tax Act. ULIP has higher liquidity compared with traditional life insurance. Under ULIP, there is an option of getting your investment back after a lock-in period of 3 to 5 years. In traditional life insurance, there is a fixed tenure before which you cannot withdraw your money. If I ask myself, why should I invest in ULIP, my answer will be that I should invest because it is more flexible and liquid compared to life insurance.

Hence, you should go ahead and invest in ULIP. It has more advantages compared to the traditional life insurance plan.