ULIP and Mutual Fund Comparison

Mutual Funds & ULIPs differ on various key factors like fund switching options, charge structure, liquidity, tax benefits and other major beneficial elements. Here is a detailed comparison between Unit Linked Insurance Plans and Mutual Funds on these aspects.

Unit Linked Insurance Plans And Mutual Funds

Comparison Between Unit Linked Insurance Plans And Mutual Funds

Description
Unit Linked Insurance Plans refer to Unit Linked Insurance Plans offered by insurance companies. These plans allow investors to direct part of their premiums into different types of funds (equity, debt, money market, hybrid etc.).	A mutual fund pools the money from investors and uses it to invest in various securities according to a pre-specified investment objective.

Objective
Unit Linked Insurance Plans are long term plans offering you a dual benefit of insurance and investment.	Mutual funds are ideal investment tool for the short to medium term.

Tax Benefit
All Unit Linked Plans offer tax benefits under section 80C.	Only investments in tax saving funds are eligible for section 80C benefits.

Switching options
Unit Linked Plans (ULIP) allows you to switch your investment between the funds linked to the plan. This enables you to change the risk return.	No switching option is available. If you are not satisfied with the performance of the fund you can exit completely from the same by paying exit charges, if applicable.

Additional Benefits
Some of the Unit Linked Plans give you an additional benefit or loyalty benefit by issuing extra fund units.	There are no additional benefits issued by mutual funds.

Liquidity
Unit Linked Plans have limited liquidity. One needs to stay invested for a minimum period of time as specified in the policy before redeeming the units.	You can easily sell mutual fund units (except for ELSS and funds that have a minimum lock-in period).

Charges structure
Charges in a unit linked plan include mortality charges for the life insurance provided. In addition, premium allocation charge, fund management charge and administration charges are applicable.	Mutual fund charges include an entry load, the annual fund management charge and an exit load, if applicable.

Benefit Snapshot
1. Dual benefit of investment and insurance. 2. Suitable for the long term. 3. Option to switch between the funds is permitted. 4. Offers tax benefits.	1. Investment tool suitable for short to medium term. 2. Easy exit possible. 3. Tax benefit available only on tax saving funds.