Both ULIP and term insurance are important insurance plans. They have numerous features and benefits to offer. But there are a multitude of differences between both these insurance plans that you should know about. Learning about these differences can help you scout for one that is best suited to your financial needs.
One of the most striking differences between ULIP and term insurance is that while the latter is an insurance plan, the former provides the benefit of investments and insurance. If you want to invest in ULIP or term insurance, then make sure you read this entire article right now.
What Is ULIP?
Unit Linked Insurance Plans or ULIPs are a fusion of both insurance and investment plans. They provide incredible flexibility, transparency, and even liquidity to policyholders. What is even more important is that ULIPs can be personalised as per the policyholder’s needs and budget.
Benefits Of ULIP
- Flexible investment options
- Great transparency
- Regular savings
- Tax benefits
- Liquidity as per the need
What is Term Insurance?
Term insurance is the purest form of life insurance plan that allows the policyholder to provide financial security to his/her family. This means that if the policyholder passes away during the tenure of the plan, then the death benefit will be transferred to his/her family. The sum assured can be transferred either periodically or as a lump sum amount.
Benefits Of Term Insurance
- A high sum assured at a nominal rate
- Numerous death benefit payout options
- Simple to understand
- Numerous tax benefits
- High coverage
Differences Between ULIP And Term Insurance
Term insurance plans are highly affordable. They can provide high coverage at lower premiums. It depends upon several factors, such as age, lifestyle, and gender. However, the same might not be the case for ULIPs. ULIPs can be cost-effective only as per the financial goals and other necessities of the individual. So, you need to invest in ULIP very mindfully.
2. Component Of Savings
Term insurance does not include any savings component. However, ULIPs provide this along with life cover. This means that policyholders can conveniently choose to invest in either debt funds or equity funds. They can also choose to make investments in a fusion of both.
3. Value Of Surrender
Term insurance policies are such that they can lapse when you fail to pay off the premiums on time. This can put the policyholder in constant worry. However, when you invest in ULIP, the case is different. Once the ULIP is surrendered while the lock-in period is ongoing, the fund value to date gets paid off. This is possible once the applicable charges are deducted according to the terms & conditions that the policy states.
ULIP Or Term Insurance- Which Is Better?
Both ULIP and term insurance have their own set of benefits and features to offer, as mentioned above. That is why you need to make a careful analysis as per your needs and budget. If you wish to make a good amount of savings and investments, then ULIPs are the clear-cut choice for you. However, if you want to secure your family’s financial future and receive a high sum insured, then you can turn to term insurance. For more details, you can connect with your policy provider right away.