ULIP can be defined as the insurance product which comes with an investment plan and insurance scheme in a single plan. The policy holders can make use of various facilities like increasing or decreasing the security level, switching between funds, top-up facilities, additional riders and option to surrender. On the other hand, Mutual Funds are considered as an investment plan which is funded by the stake holders. The investment is diversifies and the risk of losing the investment is reduced.
ULIP vs. Mutual Funds
Both of them invest their money in stocks. But there are certain difference between the ULIP equity and Mutual fund equity. ULIP comes with an additional insurance plan with the investment benefits. Here are some points which can differentiate between mutual funds and ULIP:-
ULIP gives investment benefits with insurance cover where as Mutual fund scheme comes with investment benefits.
ULIP is ideal for the long term plans and Mutual fund schemes are beneficial for short term plans.
The Regulatory body of ULIP is IRDA and SEBI for Mutual Funds.
Return on Investment
The return obtained by ULIP is variable and comparatively low. On the other hand, the returns are quite high and variable in case of mutual funds.
When you should consider
You need to consider ULIP when you want protection and nominal returns for long term plan. Mutual funds are considered when investors want high returns in long terms.
The tax benefit is available under section 80C for ULIP and it is available under ELSS of section 80C in case of Mutual Funds Schemes.
As we have already discussed that both of the scheme have their own benefits and drawbacks. You can choose your required scheme according to your requirement. But you need to be very careful while making any investment by reading all the policies.