ULIP V/S Mutual Fund

Abhinav Tyagi
3 min readMar 5, 2021

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This blog will cover the difference between Mutual fund & ULIP as two different financial products. Find the brief comparative analysis of ULIP & Mutual Fund below:

ULIP

  1. It gives a life cover and also generate returns by investing
  2. It generally has a lock-in period of 5 years
  3. In case of death of policyholder, the family member is compensated with the amount of sum assured
  4. No long term gain is applicable
  5. Amount of upto INR 1.5 lakh can be claimed as deduction in year

Mutual Fund

  1. It is purely investment product with no life cover
  2. It is totally liquid and you can enter and exit as per your investment plan
  3. In case of death of policyholder, the mutual fund investment is transferred to the nominee
  4. Long term capital gains on gains of over 1 lakh
  5. Amount of upto INR 1.5 lakh can be claimed as deduction in year but only for ELSS

Now that you briefly know the comparison between ULIP & Mutual Fund. I will deep into various aspects of it so that you can understand these financial services in detail & make a better financial decision.

There are certain Pros & Cons of both the financial instruments.

Pros of ULIP

  1. The gains from ULIP are exempted from the tax at the time of maturity unlike gains from long-term capital investment on equity and equity-related investment
  2. The amount invested in ULIP is eligible for tax-saving under Section 80C subject to a maximum of INR 1.5 lakh annually

Cons of ULIP

  1. ULIPs are market-linked and hence are volatile in the short-term. So ULIP is not a good short term investment, while other traditional policies are not market-linked so less risky.
  2. As an individual investor you will have to stay invested in ULIP for 5 years even in the case of a financial crunch or if the investment is under performing.

Pros of Mutual Fund

  1. The advantage of mutual funds is that diversification is done automatically.
  2. Mutual funds offer…

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Abhinav Tyagi

I am a product manager by profession in Indian Fintech space. Love to read and write about fintech in India and my personal travel & life experiences