ULIPs Vs Mutual Funds: What Are the Differences Between Them?

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ULIPs Vs Mutual Funds: What Are the Differences Between Them?

What are ULIPs?

ULIPs, Unit-Linked Insurance Plans, comprise numerous benefits of investment and insurance. When the investors maintain enhanced security in their returns, these ULIP plans offer them a safe source of earning with offers. There are other life plans that cover one's life, and the premium is paid against ULIP. The other portion of collected money gets invested in debt or equity funds.

For more information, investors also go with SIP, as there are some points of difference between Ulip and SIP. Hence, one should know perfectly about SIP and their terms/policies. SIP can be called Systematic Investment Plans, where the plans are mainly correlated to mutual funds. According to the lump-sum investment, these investments are made at regular intervals rather than one-time payments. 

What are Mutual Funds?

Mutual funds are primarily used as a fund that is invested in collecting a good amount of money into the corpus. This fund gets invested in many areas like stocks and bonds, which are managed by AMC ( Asset Management Company). The schemes of the mutual funds depend on the performance of the underlying funds. The results of the funds rise when the stocks or securities rise, which then results in the overall capital gain. 

The investment made in mutual funds is the best of all time investments by any user that can avail in the automatic rise of the capital amount. Mutual funds are suitable, and you can gain the best results if you have invested the amount for a long period of time and already have a term insurance plan. Also, you must have an understanding of the risk on the big assets of the stocks and long/short-term investments.

However, before investing a good/less amount of investment in the ULIP or mutual funds, there are some primary differences that you need to learn. This post brought you these primary differences; let us go into brief about the ULIP vs. mutual funds.

ULIPs Vs Mutual Funds: Which is Better?

The decision to make an investment in any of the funds depends on the preferences and mentality of the investor. Moreover, there are many aspects that investors must be prepared or ready for, like their financial goals, high/low investment, past performance related to any of the government funds like banks, risk level, and aspect of expecting the fund amount to be raised. 

The conclusion is that if you are looking for security and wealth, you can choose ULIPs. If you prefer an investment that promises considerable growth in the long term, then you can choose a mutual fund. You can work using a digital calculator for more knowledge about the increased capital amount. Using this option, one can better understand ULIP and mutual funds. This can work better than anyone’s advice when investing a good amount. 

Difference Between ULIPs and Mutual Funds

Life Insurance

The first and foremost difference between mutual funds and ULIP is life insurance coverage. The mutual fund supports life insurance, but ULIP funds do not cover it. Mutual funds cover only pure investment in security stocks or bonds but do not take charge of life insurance, whereas ULIP covers both aspects for the investor's assurance. 

Lock-in Period

There is no lock-in period in mutual funds, but the schemes in ULIP follow it. Some schemes cover a period of 3 to 5 years when investors cannot break their bonds and cannot even redeem the raised amount but only the invested amount. But mutual fund gives endless time; investors can redeem their capital at any period of time. This lock-up period follows in mutual funds only in ELSS ( Equity Linked Savings Scheme), with the minimum period considered 3 to 4 years. 


The ULIP follows a lock-in period, so no liquidity exists. Investors can not use the invested amount in any work, whereas the invested amount of mutual funds can be used by the people because there is no lock-in except ELSS. The mutual fund has good liquidity because of its terms and conditions, which are known to be official when people invest in these schemes, showing the significant difference between a mutual fund and ULIP


There is a tax deduction in ULIP followed under section 80C by the government, around 1.5 lakh per annum. But there is no deduction in mutual funds which depicts another difference between mutual funds and ULIP.  


In terms of investing in ULIP, there are some costly premiums and high charges, but mutual funds are flexible with expenses as there are no high charges or high premiums. ULIP has allocating charges, mortality charges, fund management fees, and other administrative charges. Mutual funds only cost entry and exit charges. 


Transparency causes trust and motivates a person to invest more but ULIP depicts some complexity in transparency whereas mutual fund shows more of it.

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Both are best in their own ways, if you want to save your money via lock-in purposes, then you can go with ULIP whereas for the long time investment, prefer mutual funds. However, they both are good for investment and legal at each corner. The schemes these funds follow are different and they have different terms and conditions.

  • Which is preferable to save investment?

  • Which fund is more trustworthy to invest in?

  • Do mutual funds last for an endless period of time?